Karachi IR intelligence launches crackdown against mega sales tax refund scam

Karachi IR intelligence launches crackdown against mega sales tax refund scam

Karachi’s Directorate of Intelligence and Investigation (I&I) Inland Revenue (IR) of Federal Board of Revenue (FBR) has launched a massive crackdown on individuals involved in a multi-billion mega scam revolving around bogus sales tax refunds.

This decisive action is part of a nationwide effort to combat the mafia engaged in the creation and use of fake and flying sales tax invoices, resulting in substantial losses to the national exchequer, a statement said on Saturday.

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Over the past week, the Directorate has filed two FIRs (First Information Reports) as part of the nationwide crackdown, targeting suspected individuals who have caused billions of rupees in revenue loss. Following thorough inquiries, surveillance, and discreet vigilance, the primary suspect involved in one of the FIRs has been apprehended and presented in the Court of Special Judge (Custom & Taxation) in Karachi. The court has granted a seven-day remand for the accused.

Based on the investigation and information provided by the arrested individual, a team from the Directorate executed a search warrant at the office of an Advocate/Tax consultant in a posh area of Karachi. This premises, which was unearthed during the investigation, was found to be involved in the issuance of fake and flying invoices, as well as the filing of dummy and bogus sales tax returns for various firms. The search of the Advocate’s office resulted in the recovery of crucial evidence, including pre-signed blank/unsigned cheque books from multiple firms, a large number of rubber stamps from various companies, bank deposit slips indicating substantial cash amounts, hard copies and soft data of sales tax returns and invoices related to firms engaged in the fake and flying invoices scam, as well as a laptop and computer.

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During the search, another suspect, who was in contact with the previously arrested individual and involved in the supply chain of fake and flying invoices, was also taken into custody. Subsequently, the second accused was produced in court, and a five-day remand was obtained.

Scrutiny of data and records from delinquent firms indicates that a significant number of registered trades and businesses have taken undue advantage of these fake and flying invoices to claim excessive sales tax credits and reduce their tax liabilities. Further interrogation of the arrested individuals revealed that even prominent business entities and limited companies across the country have exploited this fraudulent activity.

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The Directorate’s team of investigators is actively engaged in examining and scrutinizing records, while also seeking assistance from other agencies in this regard. The scrutiny of technical data from FBR IRIS Portal users involved in this criminal activity indicates that it is a trans-province scam. Numerous firms registered in Karachi jurisdiction, which cannot be traced to their initial declared local addresses, regularly upload/file their sales tax returns on the IRIS system from different cities in Punjab, especially Faisalabad. This practice has led to the creation of billions of rupees in undue tax credits for organized business sectors, without contributing a single penny to the national exchequer.

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Forensic analysis of computer data is currently underway, which is expected to reveal the involvement of additional culprits in the scam. The Directorate has demonstrated its unwavering commitment to zero tolerance against the fake and flying invoice mafia. Furthermore, it has advised businesses and traders to refrain from engaging in such illegal activities and to distance themselves from unscrupulous elements. The nationwide crackdown will spare no one involved in fake and flying invoice activities.

The Directorate has already submitted a preliminary report to its headquarters in Islamabad, calling for similar actions against illegal users of fake and flying invoices across the country. It is anticipated that the stern action taken against such users will have a positive impact on the revenue of the Federal Board of Revenue (FBR) in the near future.

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