November 22, 2023 – The Large Taxpayers Office (LTO) Karachi, a crucial revenue collection arm of the Federal Board of Revenue (FBR), has intensified its investigation into sales tax fraud, summoning sugar millers to appear before an inquiry regarding the issuance of fake and flying invoices.
Sources within the LTO Karachi revealed that the investigation was launched in response to complaints from various stakeholders. These complaints raised concerns about the issuance of false invoices, payment of advance tax under sections 236G and 236H of the Income Tax Ordinance, 2001, falsely attributing transactions to individuals with no business ties to the sugar mills. Additionally, there were reports of fake invoices being included in Sales Tax Returns submitted by sugar mills on behalf of various taxpayers.
This move comes on the heels of a recent decision by the President of Pakistan, who upheld the Federal Tax Ombudsman’s (FTO) ruling in a case involving Millat Tractors Limited. The case, which amounted to around Rs 15 billion in tax fraud, centered on the alleged payment of inadmissible sales tax refunds through black money transactions, utilizing fake and flying invoices, benami names, and CNICs without adhering to the mandatory conditions outlined in the Sales Tax Act, 1990.
Sources familiar with the matter claim that sugar mills employed a similar modus operandi, issuing invoices using benami names and CNICs to engage in tax evasion through black money transactions. The LTO Karachi has gathered evidence through the deployment of tax officials to monitor sales and purchases at the premises of these sugar mills.
In response to these findings, the LTO Karachi has issued notices summoning the top management of 29 sugar mills to appear before the inquiry committee to address concerns related to fake and flying invoices. According to one of the notices, a sugar mill has admitted that the issuance of these invoices was carried out on the advice of brokers.
Should the management of these sugar mills fail to provide satisfactory responses during the inquiry, further actions will be taken. This may include the lodging of FIRs (First Information Reports) and the pursuit of tax recovery along with 100 percent penalty of the evaded amounts.
It is important to note that the FBR initiated monitoring of the sugar supply about a couple of months ago. Following this monitoring, the retail price of sugar has drastically reduced to the current level of Rs 130 per kilo from around Rs 200 in August 2023.
