Karachi, June 24, 2023: The intelligence and investigation office of the Federal Board of Revenue (FBR) has uncovered a significant case of sales tax evasion by battery manufacturers.
The Directorate of I&I-IR, Karachi, conducted a search at the factory premises of leading battery manufacturers in Karachi, with a court warrant, in order to recover evidence related to fake invoices and a fake invoice supply chain that had already been identified in a First Information Report (FIR).
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During the search, the factory’s routine production activities continued uninterrupted. However, the team from the Directorate, under the supervision of the Investigation Officer, was able to retrieve substantial evidence from the company’s computers. They discovered important files containing banking evidence linked to fake sales tax invoice payments and transactions.
The investigation revealed that battery manufacturers were acquiring reclaimed ‘Lead’ from the unorganized sector without paying sales tax. To cover up these purchases, they obtained fake invoices at lower rates in collusion with an invoice mafia. They then claimed inadmissible input tax credit from the Federal Board of Revenue without actually making any payments. A significant volume of relevant records was recovered from the factory during the search, but no arrests were made.
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In a separate development, leading fashion designers have approached the Directorate’s team and expressed their willingness to join the investigation following court orders. They have also shown an inclination to make voluntary payments of the taxes involved in their respective cases.
The authorities have welcomed the voluntary payment approach of the delinquent fashion designers and have encouraged other stakeholders in the sector to adopt a similar approach. They emphasize the importance of conducting legal business activities and avoiding the illegal practice of claiming input tax credit based on fake or flying sales tax invoices. The anti-fraud agency of the Inland Revenue is determined to eradicate the menace of fake invoices from its roots.
This investigation into sales tax evasion by battery manufacturers highlights the FBR’s commitment to combating tax fraud and ensuring that businesses operate within the bounds of the law. The recovery of evidence and the cooperation of fashion designers in the investigation are positive steps towards enforcing tax compliance and safeguarding the interests of trade and revenue.
