FTO orders probe into Rs14.9b ST refund fraud

Order reveals booking of tractors was made by black money investors for commission by concealing tax

ISLAMABAD:

The Federal Tax Ombudsman (FTO) has ordered the Federal Board of Revenue (FBR) to investigate alleged tax fraud committed by Millat Tractors Ltd (MTL) against payment of inadmissible sales tax refund of Rs14.887 billion for 2017-22 period.

The FTO issued its detailed order last week in favour of the growers of Sindh, who had complained through a senior vice president of the Sindh Chamber of Agriculture (SCA), Hyderabad.

The complainants alleged illegal payment of sales tax refund worth billions of rupees to the MTL, Lahore through “self-made documents against transactions made through black money, by using fake and flying invoices, benami names and unrelated CNIC numbers, which were never audited by the FBR.

The FTO's order revealed that booking of tractors were made by black money investors, who themselves were not shown as buyers, growers or farmers rather they were only carrying on the purchase and sale of tractors for commission by concealing tax.

It added that the tractors invoiced in the names of unrelated Benami persons, who purchased the tractors without agricultural land holding and mostly used for the purposes other than agriculture ie, industry, trolleying bricks and construction material, digging of land, cleaning of garbage etc.

According to the findings of the FTO's order, the core issue was the allegation of tax fraud on payment of inadmissible sales tax refund of Rs14.887 billion during the tax periods from July 2017 to June 2022, without adhering to mandatory conditions mentioned in the Section 73 of Sales Tax Act.

The FTO has recommended the FBR to direct the Chief Commissioner Inland Revenue (IR), Large Tax Office (LTO), Lahore to probe/conduct detailed inquiry against the MTL.

“Such a camouflaging transactions in the garb of engineered purchases attributed to fake buyers/growers/farmers shields the particulars of black money investors by misusing CNICs of unrelated person and investments made and profits earned by the beneficiaries remain concealed and untaxed,” the FTO's order stated.

The FTO recommended to the FBR to direct the chief commissioner IR, LTO, Lahore to Probe/Conduct detailed inquiry in the light of discussions held in the FTO order, in accordance with the provisions of Sales Tax Act and the relevant SROs.

“Such glaring instances of omission and commission on the part of department, reflecting "neglect, inattention, inefficiency and ineptitude, in the administration or discharge of duties and responsibilities” clearly tantamount to maladministration in terms of Section 2(3)(ii) of FTO Ordinance,” the FTO's added.