Directorate General of Intelligence and Investigation Inland Revenue (IR) has detected sales tax evasion of Rs 353.485 million by a leading Oil Marketing Company (OMC). Sources told Business Recorder here on Wednesday that the I&I-IR conducted Investigation into the issue of sharing of Goods Declarations (GDs) in petroleum sector. During the investigation it is revealed that it is the normal practice in the petroleum sector that the GDs are in the name of petroleum companies, but claimed by the concerned OMC on self NTN (Local purchases) of their Sales Tax Returns instead of (imports).
The directorate observed that two petroleum companies have imported petrol for themselves as well as on behalf of an Oil Marketing Companies (OMC). The investigation identified 156 GDs in the name of two importers (oil companies) which were actually the share of an OMC. Import value of these GDs stands at Rs 16.213 billion. The registered person was confronted with the situation but he failed to offer any plausible explanation in this respect. As a matter of fact, the OMC made purchases having import value of Rs 16.213 billion through two companies which have not been declared in the Sales Tax returns. The registered person has, in fact, evaded sales tax amounting to Rs 353.485 million which is recoverable from him. Accordingly, the directorate has sent a contravention report to Chief Commissioner-IR, Large Taxpayer Unit (LTU), Lahore for adjudication and recovery of the said principle amount of sales tax along with default surcharge and penalty.
Brief facts of the case are that while conducting an investigation on the issue of sharing GDs in petroleum sector it was observed that two oil companies have imported motor spirit (Petrol) for themselves as well as on behalf of other OMCs. In this connection 156 GDs have been identified by the directorate which are in the name of two oil companies but not claimed by them and actually it is the share of an OMC. These 156 GDs have an import value of Rs 16.213 billion and involves undeclared input tax of Rs 3.042 billion.
The issue was confronted to the taxpayer and in response, the taxpayer contended that the GDs are not in their name, therefore does not appear. Manual data entry is not allowed (imports). From the said reply, it is clear that said GDs, have not been claimed (local purchases) and (import). The contention of the taxpayer that it is not acceptable on the grounds that there is no possibility to show purchases in sales columns of Sales Tax Returns. Secondly, the examination of the Sales Tax Returns shows only registered sales and one entry in each month for unregistered sale. Unregistered sale cannot be treated as imports.
It is clear from the reply of the taxpayer that GDs whose value of import value 16.213 billion pertains to the OMC and imported through two oil companies have not been declared in Sales Tax returns neither its purchases nor its sales thus evaded the Sales tax of Rs 353 million on value addition made on this activity plus due income tax is also recoverable on this taxable activity not declared.
Thus it is obvious that the import value of 16.213 billion pertains to the said OMC purchased through two oil companies which have not been declared in Sales Tax returns. Thus the OMC has evaded the Sales tax of Rs 353 million calculated on value addition made on this activity plus due income tax is also recoverable on this taxable activity.
Thus the registered person has deliberately not shown the GDs and violated the provisions of 3, 6, 7, 23, 26 by not declaring these GDs in term of section 2(37) of Sales Tax Act-1990. An amount of Rs 353,485,825/ principal Sales Tax is recoverable on account of value addition not deposited on these purchases, along with default surcharge under Section 34 of the Act which is to be calculated at the time of actual payment. The registered person is also liable to be penalised under relevant provisions of section 33 of the Sales Tax Act, 1990.
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