Customs unearths Rs1b tax fraud

Company imports tax-free raw material for sale in local market

KARACHI:

The Pakistan Customs Post Clearance Audit North has traced tax evasion worth more than Rs1 billion by a fake manufacturing unit.

A case has been registered against the tax evader, Khyber Fabrics Embroidery, after it was found that it only imported tax-free raw material for their sale rather than manufacturing value-added products.

Director PCA North Samiul Haq told The Express Tribune that Khyber Fabrics, bearing National Tax Number (NTN) 4451931-5, imported raw material worth Rs3.7 billion. Shipments were brought for its manufacturing concern.

However, instead of using the raw material for manufacturing value-added products for their supply to tribal areas, the firm sold the raw material comprising various types of fabrics in the local market.

The PCA director said that during a Customs clearance audit, it was discovered that Khyber Fabrics had been involved in misusing the tax incentives given to the erstwhile Fata and Pata.

The firm imported 4,063 metric tons of textile fabrics through 174 goods declarations worth Rs3.7 billion, including polyester tulle net, polyester organza, woven fabrics and printed and dyed fabrics, which were used in blankets.

Taking advantage of the tax incentives for tribal areas, the importer evaded sales tax of Rs720 million, additional sales tax of Rs126.2 million and income tax of Rs235.5 million, totalling a staggering sum of over Rs1 billion.

Haque said that during the raid at the manufacturing unit, it was revealed that textile mills located in Bara Bazar were actually a house which had two sewing machines and only four rolls of fabrics. He added that the importer was given ample opportunity to prove that those were legal transactions, but he failed to provide satisfactory answers.

Published in The Express Tribune, March 10^th, 2024.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.