The federal government, on Wednesday, unveiled the budget for 2024-25, presenting a comprehensive redefinition of sales tax fraud through the Finance Bill, 2024.
This redefinition aims to tighten regulations and close loopholes in the current tax system, ensuring more stringent measures against tax evasion and fraud.
According to the Finance Bill, 2024, tax fraud encompasses intentional evasion of legally due tax or obtaining undue refunds through the submission of false returns, statements, or documents, as well as withholding correct information or documents. The revised definition explicitly includes several fraudulent practices:
(a) Suppression of Sales or Receipts: This involves hiding sales or receipts that are taxable under the Sales Tax Act of 1990. Such actions prevent the accurate reporting of taxable income, leading to evasion of the due tax.
(b) False Claim of Input Tax Credit: Fraudulently claiming input tax credits without entitlement falls under this category. This practice reduces the tax liability illegally.
(c) Non-Issuance of Tax Invoices: Making taxable supplies without issuing tax invoices, in violation of the Act or the rules, constitutes tax fraud. This prevents the proper recording and reporting of taxable transactions.
(d) Issuance of Fake Tax Invoices: Issuing tax invoices without actual supply of goods to claim inadmissible input tax credits or refunds is explicitly classified as fraud.
(e) Evasion by Other Means: Any evasion of tax by availing undue input tax credit or obtaining inadmissible refunds through methods not covered under the previous clauses is included in the new definition.
(f) Failure to Deposit Collected Tax: Collecting tax amounts but failing to deposit them within the prescribed timeframe (three months from the due date) is considered fraudulent.
(g) Falsification of Records: This includes falsifying or substituting financial records, producing fake accounts, or providing false information through any means with the intent to evade tax or claim inadmissible refunds.
(h) Tampering with Evidence: Tampering with or destroying required material evidence or documents, either manually or digitally, is deemed as an act of fraud.
(i) Dealing with Confiscable Goods: This involves the acquisition, possession, transportation, disposal, or handling of goods liable for confiscation under the Act or its rules.
The Finance Bill emphasizes that any of the aforementioned acts or omissions will be treated as intentional fraud unless the accused can prove the absence of intent, motive, knowledge, or reason to believe that they were committing a fraud.
This redefinition aims to bolster the government’s efforts to combat tax evasion and ensure a fairer, more transparent taxation system. By explicitly outlining various fraudulent activities and establishing a presumption of intent, the government seeks to deter tax fraud and enhance compliance with tax laws. Experts believe these changes will significantly contribute to reducing tax evasion, thereby increasing revenue and promoting economic stability.