President Arif Alvi instructed the Federal Board of Revenue (FBR) to reinstate an inquiry against M/s Millat Tractors Ltd (MTL) concerning an alleged improper sales tax refund exceeding Rs 12 billion obtained through "Benami" transactions during the tax period of 2018-2022.
During a press conference at the FTO Headquarters, Almas Ali Javinda, Advisor (Legal), along with Muhammad Nazim Saleem, Advisor (Sales Tax), and Muhammad Naseer Butt, Advisor (Income Tax), disclosed that the President dismissed representations from both the FBR and MTL and supported the FTO's directive to initiate recovery measures against the company.
Nazim Saleem, FTO Advisor (Sales Tax), highlighted that the crux of the matter revolves around MTL charging 5 percent sales tax from tractor buyers but failing to deliver tractors before June 30, 2022. This act contradicted the "time of supply" stipulations outlined in section 2(44) of the Sales Tax Act 1990.
The FBR officials purportedly overlooked the violations by the company. Additionally, sales tax was abolished on tractor supplies from July 1, 2022. When buyers sought refunds from MTL, their requests were denied, leading them to file complaints with the FTO.
The President's order emphasized the FBR's ongoing post-refund and sales tax audits targeting the company.
Almas Ali Javinda, FTO Advisor (Legal), emphasized that the President's decision would benefit numerous farmers who paid excessive sales tax to MTL for tractor purchases at inflated prices. Allegedly, M/s MTL engaged in tax fraud through Benami transactions, utilizing multiple individuals' computerized national identity card numbers (CNICs).
The FBR, upon verifying the fraud through audits, might initiate criminal proceedings against the company and Large Taxpayer Office Lahore officials, noted FTO Advisor Legal.
FTO Advisor (Legal) highlighted how such transactions obscured the true beneficiaries' identities, allowing black money investments to evade taxation.
Javinda specified that the FBR has taken immediate steps to halt the company from filing new refund claims and initiated audit proceedings for Tax Years 2018-2022, while also stopping further refund processing.
The President's decision prioritizes the ongoing FBR audits and emphasizes providing MTL an opportunity to present their perspective for inclusion in the audit report, aiming to ensure a fair investigation without prejudicing the competent authority's independence.
