In a notable directive, President Arif Alvi has called upon the Federal Board of Revenue (FBR) to resume a comprehensive investigation into M/s Millat Tractors Ltd (MTL) over the alleged improper claim of sales tax refunds amounting to over Rs 12 billion. These refunds were purportedly based on ‘Benami’ transactions spanning the tax period from 2018 to 2022.
During a press briefing at the FTO Headquarters, advisors Almas Ali Javinda (Legal), Muhammad Nazim Saleem (Sales Tax), and Muhammad Naseer Butt (Income Tax) detailed that the President has overturned appeals by both the FBR and MTL, upholding the FTO’s decision to initiate recovery procedures against MTL.
Nazim Saleem highlighted the core of the matter, noting MTL’s failure to comply with the ‘time of supply’ rules under section 2(44) of the Sales Tax Act 1990. He noted that MTL charged a 5% sales tax from purchasers but did not deliver the tractors by the June 30, 2022 deadline, thus violating tax regulations. Furthermore, he pointed out the cessation of sales tax on tractors from July 1, 2022, onwards and the company’s subsequent refusal to process refund requests, which led to complaints against MTL at the FTO.
President Alvi’s mandate also mentioned that the FBR has begun a post-refund and sales tax audit of MTL to reach a decisive conclusion.
Almas Ali Javinda elaborated on the gravity of the alleged fraud, indicating that MTL’s actions not only disadvantaged numerous farmers with inflated sales tax charges but also involved ‘Benami’ transactions and the misuse of individuals’ CNIC numbers, suggesting a large-scale tax evasion through these fabricated transactions.
Javinda also remarked on the immediate measures taken by the FBR, including halting the processing of new refund claims by MTL and the initiation of an audit for Tax Years 2018-2022. President Alvi’s decision highlighted the necessity for the FBR to conduct a fair audit and ensure MTL’s position is considered in the audit report, thereby preserving the autonomy of the auditing authority. This step is seen as critical in safeguarding the integrity of tax operations and ensuring transparency in the agricultural sector’s taxation.