Sources told Business Recorder on Wednesday that the intelligence agency of FBR has deputed special teams of officials at various places across the country. These intelligence officers are working under the cover of clients to approach persons involved in fraudulent businesses of fake and flying invoices.
The undercover officials would show themselves as persons who wanted to purchase fake invoices for obtaining tax adjustments. This is one of the methods to detect gangs operating for obtaining inadmissible adjustments and fake refunds on forged documents.
The intelligence officials in plain clothes are spread in different markets, business centres and areas adjacent to RTOs, etc. There are unscrupulous persons in all cities who are neither businessmen, importers, exporters or manufactures, nor are involved in any kind of business activity. They are solely involved in activities of using fake documents and invoices with the help of data of non-filers, dormant companies or inactive taxpayers. In other cases, there are gangs involved in fake buying and selling of goods for claiming huge amount of sales tax refunds on bogus invoices.
According to sources, the intelligence officers of DG I&I are actively working in all major cities and will work under the guise of clients to unearth scams of fraudulent sales tax refunds. The intelligence officials are tracing organised gangs involved in business of purchasing fake invoices for claiming input tax adjustment. There are apprehensions that gangs might be involved in selling of User ID/Password to people who sell/file sales tax returns and issue fake invoices, which were utilised for obtaining input adjustments.
When contacted, a tax expert said that the absence of an authentic sales tax database has barred the FBR from invoking provisions of a controversial sales tax law, "Missing Traders Fraud" under which all partners in the supply chain are liable to deposit unpaid amount of tax not paid at any stage of supply.
In cases of "Missing Traders Fraud", the entire supply chain is involved in fraud to obtain refunds on fake documents. The law was introduced in budget 2006-07 but its implementation was suspended due to severe criticism from business community. In Pakistan, there is no authentic database on buyers and sellers within a supply chain for sales tax verification.
Under the law, the board had introduced several strict provisions in the Sales Tax Act, 1990 to reject the fraudulent refund claims where the amount has not been actually deposited by the supplier. Section 8 of the Sales Tax Act was amended to disallow refund or 'input tax adjustment' in case the claimed tax has not been deposited by the respective supplier.
Meanwhile, according to an announcement of FBR, the Directorate General Intelligence & Investigation of FBR has pressed ahead with its probe into fake invoices racket by four accused held last week. Further interrogation of two of the accused, namely Muhammad Shafqat S/o Muhammad Qasim and Mohsin Hanif s/o Muhammad Hanif, showed that Shafqat, a computer expert, would take advantage of FBR website's Taxpayer Facilitation Portal (e.fbr.gov.pk) and decode the 'user ID' and 'password' of in-operative/Nil file/closed units.
The modus operandi, as admitted by the accused, was that once a person approached Shafqat with NTN number of a registered person, the accused Shafqat said that in the e-enrolment field of FBR's web portal and got CNIC of the owner of that particular unit. After getting CNIC number, through e-enrolment, it was quite simple to get the user ID and password of that unit and subsequent filing of e-returns. Subsequently, the accused would sell that User ID/Password to the people who sell/file sales tax returns and issue fake invoices. These invoices were then utilised for obtaining input adjustments and refunds.
Interrogation of other accused named Mohsin revealed that he possessed expertise in graphic designing and routinely altered particulars in registration certificates and other documents.
Four computers along with heaps of incriminating documents, including blank letterheads of different banks, blank KESC electricity bills and letterheads of different units, blank sales tax invoices and unfilled stamp papers having specimen signatures, were recovered from the accused. The DG Intelligence of FBR estimates that hundreds of millions of rupees were being evaded through this scam. The accused have been remanded in custody and further investigation is under way, the FBR added.