Federal Board of Revenue (FBR) Chairman Sohail Ahmed has disclosed that the Federal Board of Revenue (FBR) has taken steps to issue sales tax registration numbers (STRNs) after due verification to check fraudulent companies, who obtain STRNs for filing bogus refund claims.
During the review of FBR accounts for 2005-2006, he informed the PAC that the certain unscrupulous elements complete all kind of documentation to get sales tax registration for obtaining illegal refunds on fake/flying invoices. These fake companies try to fulfil all kinds of legal requirements to evade the authorities for obtaining registration with the sales tax department.
Abrar Ahmed Khan FBR Chief Sales Tax explained that the FBR has centralised the process for issuance of STRNs after online verification of computerised national identity card number (CNIC) and National Tax Number (NTN) from National and Database Registration Authority (Nadra). Previously, local tax offices used to issue STRN, which was done without online verification from Nadra. During the last 3-4 years, FBR headquarters has been involved in issuance of STRNs after online verification from Nadra.
Similarly, the persistent non-filers of sales tax and federal excise returns have been excluded from the database to check such non-filers from filing refund claims. These persistent non-filers were out of the system to avoid incidences of fake claims. Due to automation and linkage with Nadra, the authenticity of the applicant has been ensured for issuance of STRNs.
Abrar further said that the precautionary measures have been taken to ensure admissible payment of sales tax refund through STARR computer programme. The FBR has withdrawn the discretionary powers of the sales tax officials of Grade-17-18 to manually overrule objections raised by the 'Sales Tax Automated Refund Repository Computer System' (STARR) to check fraudulent refund claims filed by unscrupulous elements. It has been decided that the over-ruling powers in issuing sales tax and income refunds shall only be available to the tax officials in Grade-19 and above. Now, STARR objections could be overruled by only Additional Collectors.
According to the Auditor General office, the Collectorate of Sales Tax and Federal Excise, Rawalpindi detected a case of tax fraud committed by eight registered persons/units by indulging in issuance of fake/flying sales tax invoices. The physical visits of the departmental representatives revealed that the units were not in existence at their registered addresses. The Collectorate adjudicated the cases during January and March, 2005 enforcing recoveries against the fake companies. The lapse was pointed out to the department and to the FBR in July, 2006.
It was intimated by the department that the defaulters are not traceable at their addresses. A team comprising two senior auditors has been constituted to prepare supplier-wise list of false and flying invoices issued by these units and prepare supplier-wise lists of input invoices against which input has been claimed by these units. It would be checked whether or not confirmation of input invoices was done and the relevant returns whether or not the units had any carry forward or only a procedural lapse is involved.
The departmental accounts committee (DAC) observed that the previous decision of the DAC to place the issue before the PAC for guidance and decision still holds goods. The DAC in its fresh meeting held in August 2009 directed the RTO Rawalpindi to initiate proceedings for extradition of the proclaimed offender along with other efforts for recovery and report progress to audit. The update to be received from RTO, Rawalpindi will be placed before the PAC for guidance, Auditor General office added.