FBR issues directives on bogus refunds

KARACHI: The Federal Board of Revenue (FBR) has directed all the tax offices to reply to registered taxpayers in case of fake and bogus refunds under the newly developed Computerised Risk-Based Evaluation of Sales Tax (CREST) system.

A letter sent on Wednesday to all Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) said officials posted at enforcement were not visiting the Integrated Tax Management System (ITMS) for redressal of taxpayer complaints.

“In order to make the system fully functional, all the units’ in-charge of the enforcement wing may log in ITMS /CREST and respond where any registered person has submitted any reply,” said the letter.

FBR officials said that CREST would help the revenue body to reduce the tax gap by eliminating bogus refunds on fake invoices. According to an estimate, approximately Rs50 billion worth of bogus refunds were made in just first four months of the current fiscal year.

An FBR official said that CREST had been developed to select sales tax returns of persons in cases where input tax credit was claimed on the basis of fake imports and fake purchases. The system would show any zero rated sectors where the sales are made to registered persons who are otherwise inactive, suspended or black-listed and in this way preempts their attempt to evade reduced tax of five percent on such sales. The system would also focus on the value addition tax at the rate of three percent and fake exports, the officials added.

According to a statement issued by the FBR, those found involved in fraudulent activities as a result of scrutinizing data and the responses received from compliant taxpayers, would be prosecuted.

“The centralised system shall be shortly sending the details of the fake purchases/sales to the concerned taxpayers and to concerned tax officers and will be given a time of 15 days either to show the lawful evidence of their purchases or make the tax which they are evaded,” it added.

On Wednesday, the FBR also released a manual regarding CREST for taxpayers. The manual said that the home grown system would check the information contained in monthly returns, customs import and export data and cross match each other for every registered person.

“Any exception pointed out by the system will be conveyed electronically to the concerned registered person who in turn can explain the position through attaching the supporting document,” it said, and added that the system had a built-in capacity to verify the veracity of the reply received from the registered person.

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