ISLAMABAD: The Federal Board of Revenue (FBR) has detected a reputed company evading billions of rupees in sales tax through the use of illegal credit notes.

On June 20, the Directorate of Intelligence and Investigation (Inland Revenue) in Lahore recovered sales tax amounting to Rs1.358 billion and a default surcharge of Rs26 million.

An official announcement of the FBR released on Wednesday said that the company had issued illegal credit notes of huge amounts in Annexure-C of the sales tax returns without corresponding debit notes from the buyers. In this way, the company suppressed output tax to reduce its sales tax liability for the tax periods in which illegal credit notes were issued and thus deprived the national exchequer of due tax revenue.

The tax team gathered information without disturbing the business activity of the company and initiated proceedings under section 38 of the Sales Tax Act 1990 and retrieved the record and documents from the business premises. Consequently, the company management agreed to deposit the amount of sales tax involved in the credit note issued/claimed in the return of March 2023 along with the default surcharge.

Accordingly, to place a system check on such fake credit notes, the sales tax return has been amended to disallow suppliers of goods to issue/claim credit notes in the returns without first issuance of debit notes by the corresponding buyers.

The FBR is committed to eradicating the menace of tax evasion and tax fraud to provide a level playing field to the businesses that are tax-compliant and contributing to the national exchequer.

Published in Dawn, June 22nd, 2023