KARACHI: In a significant development following the press conference held on October 10, 2024, by the Finance Minister, the Chairman of the Federal Board of Revenue (FBR), and the Director General of Intelligence & Investigation, Inland Revenue, a nationwide crackdown has been launched against businesses benefiting from fake or flying invoices and their Chief Financial Officers (CFOs) involved in tax malpractices. This operation has led to the arrest of five individuals on October 14, 2024, including a notorious fraudster known for creating chains of dummy businesses and four top management members of end-user companies responsible for tax fraud, resulting in billions of rupees in sales tax losses to the national exchequer.
In Hyderabad, the Directorate of Intelligence & Investigation-Inland Revenue arrested the CFO and Purchase Officer of a prominent Lahore-based battery manufacturer. These individuals were charged with abetment and connivance in sales tax fraud by claiming fake input tax on lead. This intelligence-based operation, supported by the Directorate in Lahore, revealed that the actions of the arrested individuals alone caused a revenue loss exceeding one billion rupees to the national exchequer.
In a separate operation, the Directorate of Intelligence & Investigation-Inland Revenue in Faisalabad apprehended the CFOs of two sister concerns and a leading Faisalabad-based textile unit. These CFOs were implicated in sales tax fraud by claiming fake input tax on coal. The fraudulent activities of this gang of fraudsters have resulted in hundreds of millions of rupees in losses to the national exchequer. An FIR had already been registered against the suppliers, beneficiaries, and other conspirators involved.
Additionally, on October 14, 2024, the pre-arrest bail of Taswar Shahid, a key member of a gang operating fake and dummy units to generate fake sales tax input, was rejected by the court. Shahid was subsequently arrested outside the courtroom. His fraudulent activities have caused billions of rupees in losses to the national exchequer.
These arrests are part of a broader, country-wide crackdown against organized mafias and beneficiaries involved in sales tax fraud. This initiative aligns with the FBR’s enforcement measures aimed at enhancing tax compliance.
Historically, excise and taxation employees were stationed at manufacturing units to oversee input and output recommendations. However, this system was abolished in 1996, leading to a reliance on manufacturers’ declarations, which has been criticized as a flawed decision. The current system of lifetime sales tax and income tax registration, as opposed to annual renewals, has also been identified as problematic, as it fails to keep company data updated. The FBR is urged to verify whether manufacturing units are located in industrial or residential areas, as non-industrial area units are often involved in fraudulent activities.