LAHORE: The Intelligence and Investigation of Inland Revenue (I&I IR) of the Federal Board of Revenue (FBR) unearthed a tax fraud by a leading textile group, which was using benami accounts to evade sales tax.
The group had evaded Rs330.56 million through eight dummy companies. According to the FIR lodged by the I&I IR of Lahore Directorate, a copy of which is available with The News, the group was accused of evading sales tax. The FBR discovered that the Lahore Textile & General Mills Ltd, Jamhoor Textile Mills Ltd, Tribal Textile Mills Ltd, Shahzad Textile Mills Ltd, Fazal Cloth Mills Ltd and others were involved in massive tax evasion by misusing the facilities granted under SRO 283(I)/2011 dated 01-04-2011.
Under the provision of the aforesaid law, a registered person engaged in the business of leather, textile, carpets, sports goods and surgical goods is entitled to make taxable supplies zero rated subject to the condition that supply of the said goods are made to another registered person engaged in the manufacturing/processing/supplies of the same goods.
In case supplies of these goods are made to unregistered persons, sales tax of four to six percent would be levied as per conditions specified in the abovementioned notification. The applicable rate of payable sales tax is now five percent.
The FIR revealed that from April 2011 to December 2012, Lahore Textile & General Mills Ltd, Jamhoor Textile Mills Ltd, Tribal Textile Mills Ltd, Shahzad Textile Mills Ltd and Fazal Cloth Mills Ltd declared taxable supplies valuing in Rs6.611 billion pertaining to textile articles at zero rate to eight dummy registered persons just to evade five percent payable sales tax on their supplies.
Jamhoor Textile Mills Ltd has declared supplies worth Rs1,808,583,717 against which payable taxes are Rs90,429,186. The Lahore Textile & General Mills supplied goods worth Rs1,686,498,077 with tax liabilities of Rs84,324,904. Tribal Textile Mills Ltd supplied goods worth Rs1,281,594,838 with liabilities worth Rs 64,079,742. Shahzad Textile Mills Ltd supplied goods worth Rs991,543,415 with payable taxes of Rs49,577,171 and Fazal Cloth Mills Ltd supplied goods worth Rs843,062,136 with payable sales tax of Rs42,153,107.
The management of Lahore Textile & General Mills Ltd, Jamhoor Textile Mills Ltd, Tribal Textile Mills Ltd, Shahzad Textile Mills Ltd, Fatal Cloth Mills Ltd, with connivance of the operators of dummy firms (namely Ride Cloth, Al Had Garments, Galaxy Traders, United Traders, Laiba Textile, Hirra International, Pakeeza Traders, A.I Garments, and others) between April 2011 and December 2012 have neither supplied any zero rated goods to the actual registered persons but just issued fake/flying invoices to the dummy registered persons to evade payable sales tax on their supplies.
They have thus deliberately evaded sales tax amounting to Rs330.564 million by committing tax fraud as defined under Section 2(37) of the Sales Tax Act,1990 which is recoverable from them under section 11 of the Sales Tax Act,1990 along with default surcharge under section 34 of the Sales Tax Act, 1990 besides penal action under section 33 (5), (11c), (13) and (16) read with section 2(37) of the Sales Tax Act, 1990.