Large steel producers have requested the government to end the ongoing practice of claiming input taxes through fake sales tax invoices and said that this is damaging the business of legitimate companies and resulting in losses worth billions of rupees to the exchequer.
In a letter written to Inland Revenue Member Operations Dr Muhammad Ashfaq Ahmed, officials of the Pakistan Association of Large Steel Producers (PALSP) urged the Federal Board of Revenue (FBR) to put an end to the practice of fake and flying tax invoices for input tax claims.
They voiced concern that it was resulting in losses of billions of rupees to the exchequer every month.
PALSP Secretary General Syed Wajid Bukhari pointed out that the practice was adversely impacting the documented steel manufacturers who paid taxes to the government regularly.
“Due to this menace, the documented sector is in a state of great disadvantage and it is likely to shrink further in comparison to the tax evading segment,” he said.
“The issue of flying or fake invoices will lead to the closure of the documented steel sector.”
According to him, this issue will also discourage future investment in the steel sector.
The FBR had standard operating procedures (SOPs) to deal with cases of fake or flying invoices and the directorate general of internal audit at the Inland Revenue had powers to examine such invoices in field formations across the country, he said.
“We urge the apex body to tackle this problem by working jointly with our association,” he stressed.
“We recommend the identification of fake and flying invoices as the first step in this regard.”
After having meaningful discussion, PALSP and the FBR could devise a strategy to deal with the problem through structural changes in the Sales Tax Act, which would make it impossible to use flying invoices, he said.
The secretary general added that under the present general sales tax system, the problem of flying invoices could not be addressed.
Harmonised System (HS) codes in the current system would have to be reviewed, which made it impossible to cross-check invoices.
“PALSP is ready to cooperate with the FBR to eradicate this problem so that the country and steel industry can grow,” he said.