Sales tax law to be amended to control fake exports

The Central Board of Revenue (CBR) will amend sales tax law for placing new checks on exports to Afghanistan to control fraudulent cases of sales tax refunds on the fake exports.
Sources told Business Recorder on Thursday that the CBR had made it mandatory for the exporters to submit the manufacturers' invoice for claiming sales tax refund on exports to Afghanistan From 2007-08.
Explaining the decision, sources said the condition of allowing sales tax refund only the manufacturers on the basis of invoices issued by the manufacturers had been made compulsory. During the last few years, the export of non-traditional items was considerably enhanced to Afghanistan and many big cases of tax frauds have been detected by the CBR.
In most of the cases, fake exports of non-traditional items were filed to claim bogus refunds. To check such scams, it has been made compulsory to submit the manufacturers' invoice, otherwise sales tax refund would not be admissible.
The CBR had conducted 'chain audit' of the exporters of plastic crockery, aluminium products, toffees, ink, bubble gum and other items to Afghanistan after detection of several cases wherein fraudulent refunds and rebates were claimed without actual exports of these goods.
Quoting examples, sources said a company dealing in aluminium products; a food grain dealer and ink exporter have claimed huge amount of refunds and rebates on the exports to Afghanistan. All these units have abnormal tax profiles based on the record available with the department.
Similar cases were also detected in the past where refunds were claimed on 'paper shipment' or invoices of blacklisted units were used to commit tax frauds. It has been observed that refunds were usually claimed on the exports of plastic crockery, toffees, vegetable ghee, bubble gum and other items, which were comparatively consumed less in Afghanistan. To check any possible fraud, 'input suppliers' from whom the exporters have purchased the goods would be probed.
The scrutiny of record revealed that the refunds were claimed on fake invoices issued by the blacklisted companies. Further investigations revealed that most of the suppliers have denied supplying these items to the food grain dealer.
It appeared to be a case of 'paper shipment' where refunds were claimed on mere paper transactions without actual exporting goods to Afghanistan. Input claims were made on the documents of blacklisted companies. The decision announced in budget 2007-2008 would check fake exports to Afghanistan, sources added.