The Federal Board of Revenue (FBR) has unearthed alleged tax evasion amounting to Rs. 300 million, implicating M/s Warraich & Warraich International (Pvt) Limited, a company based in Islamabad.
A team of Directorate of Intelligence and Investigation, Inland Revenue, Islamabad discovered the tax fraud after probing sales tax returns and related records of the company. Upon initial findings, authorities arrested Umar Iqbal Warraich, the Director of the company, who is now in jail on judicial remand.
Another individual linked to the fraud is under investigation following his arrest, with authorities hoping to catch more individuals involved in this elaborate fraud.
Brief Facts of the Case
During the period July 2022 to September 2023, the accused persons through their registered company Warraich & Warraich, having a registered office in Islamabad, declared supply of “General/ Miscellaneous items” to M/s Harbonx Industries (Pvt) Ltd, Ministry of Defense Production, Pakistan Navy, Pakistan Ordinance Factories & NESCOM Foundation amounting to Rs. 1.7 billion and charged output tax of Rs. 311.711 million from said buyers.
The said amount of sales tax was required to be deposited with the exchequer by Warraich & Warraich along with its sales tax returns. However, instead of paying their sales tax liability, the accused declared fake purchases amounting to Rs. 1.7 billion in the company’s sales tax returns for the tax period July 2022 to September 2023 from Lahore, Rawalpindi, Islamabad, and Peshawar-based suppliers namely M/s Muzaffar brother Trading Co (Pvt) Ltd, M/s IBM Trading International, M/s Hamza Traders, M/s Mega Tech Enterprises, M/s Jalil Traders, M/s Khan Steel Industries, Habib Steel Re-Rolling Mills, Tabish Steel Furnace, M/s Yaseen Steel Furnace, M/s BM Steel Re-Rolling Industries, M/s Champion Trading Corporation, M/s Malik Traders, M/s Shah Enterprises, M/s Tahir Brothers, M/s Zeeshan Trader, and M/s ABF Enterprises and claimed input tax of Rs. 309.46 million against said purchases.
Analysis of the supply chain, as defined in section 2(33A) of the Sales Tax Act, 1990, revealed that the description of goods from the first purchase or import to the stage of final supply is not matched. This means thereby suppliers of the accused are involved in facilitating the accused to claim and adjust the input tax against the output tax of goods supplied to reduce the accused’s sales tax liability.
Hence, the accused through their registered company Warraich & Warraich knowingly, dishonestly, and fraudulently contravened the provisions of sections 6,7, 8(1)(d), 22, 23, 26 & 73 read with section 233A) and 2(37) of the ibid Act and claimed fake input tax amounting to Rs. 309.465 million on the strength of ake & flying invoices to minimize their sales tax liability.
The preliminary inquiry also revealed that the alleged gang of fraudsters operating in the guise of sales tax registered persons along with their connivers, facilitators, and others have worked together and have knowingly, dishonestly, and fraudulently manipulated the computerized system of FBR for their ulterior motives and caused huge loss of revenue to the tune of hundreds of millions of rupees to the National Exchequer.
FIR said since it is established in the light of the above-narrated facts that the accused utilized and benefitted from the fake & flying invoices to minimize their sales tax liability in violation of law, committed tax fraud, and breached the trust of the State reposed in them by failing to statutory obligations therefore the case against the accused and others has been registered u/s 37A of ales Tax Act, 1990 for committing tax fraud as defined in section 2(37) of the Sales Tax Act, 1990 punishable 33(11) and 33(13) of the ibid Act.
On the direction of the competent authority, the investigation of the case has been entrusted to Senior Auditor, I&I IR, Islamabad.
