Feb 6, 2022: In the latest scam to surface in the Federal Board of Revenue (FBR), it has been alleged that tax authorities illegally paid over Rs16 billion in sales tax refunds to hundreds of big retailers in the past five months.

As per government sources and a list of beneficiaries of the illegal input tax adjustments, the payments were made between September 2021 and January 2022 in violation of the Sales Tax Act and Sales Tax General Orders (STGOs) issued during the period.

According to sources, tax authorities failed to implement at least four orders that had disallowed 60% input tax adjustments for those large retailers who did not integrate with the tax system through Points of Sale (POS). Through the Finance Act 2019, the government had decided that those tier-I retailers that would not integrate with the FBR’s online system would be penalised by denying them refunds of up to 15% of their claims. This ratio was increased to 60% through the Finance Act 2021.

The FBR subsequently issued various STGOs from August 2021 to December 2021. But the record showed that the FBR did not implement these STGOs and allowed illegal sales tax adjustments for hundreds of retailers.

The matter has already been brought to the notice of Finance Minister Shaukat Tarin and the FBR chairman has formed an inquiry committee.

According to a report by the Express Tribune, FBR chairman Dr Muhammad Ashfaq says that an inquiry committee had been constituted to ascertain whether it was deliberate or negligence of the officers of Pakistan Revenue Automation Limited (PRAL) or the FBR. PRAL is a subsidiary of the FBR that handles its database.

“Our own system detected the input tax adjustments for the non-integrated tier-I retailers and I immediately ordered an inquiry that should be appreciated,” Ashfaq said.

Increasing revenue collection by linking POS to FBR database was the biggest move announced by Finance Minister Shaukat Tareen in the budget. The Minister presented the POS initiative to the International Monetary Fund (IMF) as the largest revenue generator for the current financial year.

Tareen said he would connect 500,000 POS to the FBR system and collect Rs 100 billion in taxes from retailers in two years. At the end of last financial year, the FBR had about 11,000 POS registered, which has now increased to about 15,000.

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