Defence-related equipment: Supplier found involved in claiming inadmissible input tax adjustment

A supplier of defence-related equipment to a defense organization has been found involved in claiming inadmissible input tax adjustment against local purchases of computer equipments and Regional Tax Office (RTO) Islamabad has expanded the scope of investigation to nab the whole supply chain involved in issuance of fake/flying invoices.

It is learnt that the company is engaged in developing and installing a complete system to reduce the response time in case Pakistan faces an air-strike from the enemy.

The scam has been unearthed by an expert team of Regional Tax Office (RTO) Islamabad that exposed nexus of registered persons involved in mere paper transactions and issuing fake/flying invoices worth billions of rupees to deprive the government of its legitimate revenue.

The RTO Islamabad under the directions of chief commissioner has undertaken a special initiative to identify cases where fake/flying/suspicious transactions are carried out and inadmissible input tax adjustments are made by unscrupulous elements present in the guise of registered persons. During a probe into inadmissible input tax adjustment initiated against a company and its suppliers, the company was found making abnormal heavy input tax adjustments to reduce tax payments. An abnormal heavy input raised the flag of the Investigation Cell comprising Farrukh Amir Sial, Deputy Commissioner, Syed Nadeem Zaidi and Arafat Rasool (Senior Auditors) and a close eye on the affairs of the company was kept.

According to sources, the company is supplying defence-related equipment, which is of sensitive in nature and not locally available. Therefore, the equipment was imported by the company and supplied to the defense organization. During inquiry, the company voluntarily deposited Rs 160 million of inadmissible input tax adjustment claimed against local purchases of computer equipment. The very fact exposed the whole supply chain involved in issuance of fake/flying invoices issued by the unscrupulous elements operating from Karachi. Not a single penny was paid to the government kitty by any of the suppliers in the supply chain. Income Tax Returns were neither filed properly nor were any financial worth seen to make purchases and supplies in millions of rupees.

The I&P Cell of RTO, Islamabad, unearthed the nexus of these registered persons and their suppliers/buyers, back and forth, who are involved in mere paper transactions and issuing fake/flying invoices worth billions of rupees to deprive the government of its legitimate revenue and requested to the Federal Board of Revenue to initiate immediate thorough chain investigation against the persons operating from Karachi in order to ascertain the element of tax evasion and to retrieve the revenue loss to the exchequer, sources said.

Details of the case revealed that the RTO Islamabad has undertaken a special initiative to identify cases where fake/flying/suspicious transactions are carried out and inadmissible input tax adjustments are made by the unscrupulous elements present in the guise of registered persons.

Copyright Business Recorder, 2019