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Over-invoicing of textile items: Revenue Board to approach banks for information

ISLAMABAD (November 06 2003): Extending the scope of investigation against over-invoicing of textile products exported to the UAE/Saudi Arabia, the Central Board of Revenue (CBR) has decided to approach banks for obtaining information on the sales tax refunds against the over-valued exports to the UAE, Saudi Arabia and South Africa.

Recently, the tax authorities found that bed-sheets exported to South Africa and the UAE are being over-invoiced as compared to identical goods exported to the European Union (EU) and the United States of America (USA).

The CBR suspects that the sales tax registration numbers were issued to some exporters without due diligence, and the refund was paid to the selected exporters to UAE, Saudi Arabia and South Africa, by raising unnecessary objections on documents of other genuine claimants.

The CBR has recommended to the concerned Karachi-based high-ups to fix responsibility for making flawed sales tax registration without proper verification.

Moreover, the payments to certain selected registered people had been made without following the laid down criteria of “First received first paid” basis.

The tax officials allegedly feed frivolous objections in the computer against many genuine claimants, in order to sanction refund claim to certain favoured few exporters sending consignments to the UAE, Saudi Arabia and Africa.

The CBR also said that the cheques issued for refund were being deposited in the bank accounts, which were operated by the perpetrator of the fraud, whose whereabouts were available with the banks and could be obtained either directly or through the Income Tax Department, for complete information about the suspected bank accounts.

Similarly, the Sales Tax Refund Rules were provided for issuance of refund cheques, indicating the specific accounts of the exporters. Such bank account numbers were available with the collectorates.

There were many people who own companies registered with the Sales Tax Department and had over-invoiced the goods in order to defraud the government.

The modus operandi employed by these people was to obtain refund on the basis of sales tax invoices, issued by people who were either not presently available at their given addresses, or had shown purchases from wholesalers, distributors and other people, who had actually paid no sales tax on these reported supplies and purchases.

The CBR said that the total value and unit price of export by each sales tax registered person and the total value of exports of bed-sheets to the UAE and Saudi Arabia needed to be cross checked with the data of exports maintained by the PRAL/Export Collectorate Custom House, Karachi.

The CBR has expressed its concern that the list of exporters of bed-sheets to Saudi Arabia has been submitted to the board without proper scrutiny.

The names of the exporters have been repeated many times and in some cases the same exporter has different sales tax registration numbers, while the national tax number (NTN) and unit price remained the same.

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