FBR unearths ‘invoice skipping’ scam

ISLAMABAD: The Federal Board of Revenue (FBR) has unearthed a new kind of tax fraud, i.e., “invoice skipping” by certain big retailers to document less sales with the FBR’s Point of Sale (POS) system to avoid documentation of their actual sales.

Explaining the proposed provision of “business premises liable to be sealed” under the Finance Supplementary Bill, 2021, the FBR Member Inland Revenue (Policy), Thursday, informed the Senate Standing Committee on Finance that the FBR has found that certain Tier-I retailers (big retail outlets) in connivance with the service providers, i.e., authorised vendors have installed machines, which skip invoices to show less sales.

The “invoice skipping” would result in less documentation of the actual sales transactions taking place at the big retail outlets.

There are also cases of huge difference in the declared sales and actual sales on some big retail outlets.

The checking and raids on some big retailers revealed that they have suppressed their actual sales to avoid payment of sales tax.

The committee members also asked the FBR officials to explain that the section to seal the retail outlets has been incorporated in the law on the pressure of the International Monetary Fund (IMF). The FBR Member responded that the said provision has nothing to do with the IMF but it is the FBR’s own enforcement proposal.

Senators including Mohsin Aziz, Kamil Ali Agha, and Masudik Masood Malik objected to the said proposed provision of sealing of business premises under the Finance Supplementary Bill, 2021.

The committee members objected that the prior notices must be issued before taking such an extreme measure against the big retail outlets.

The FBR Member said that there would be no chance of misuse of the provision because approval from the highest level in the field formations is required, i.e., Chief Commissioner.

Through the Finance Supplementary Bill 2021, the business premise would also be sealed in addition to imposition of penalty against the offence where any person, who is integrated for monitoring, tracking, reporting or recording of sales, production and similar business transactions with the Board or its computerized system, conducts such transactions in a manner so as to avoid monitoring, tracking, reporting or recording of such transactions, or issues an invoice which does not carry the prescribed invoice number or barcode or bears duplicate invoice number or counterfeit barcode, or any person who abets commissioning of such offence.

The bill also provides for increasing monetary penalties up to four defaults against the retailers who fail to get them registered or fail to integrate their business as required under the Sales Tax Act. At present, business promises is sealed after the fourth default, if a person fails to integrate the business premises.—SOHAIL SARFRAZ