KARACHI: Millat Tractors Limited (MTL) fraudulently claimed Sales Tax refund amounting to Rs 5.699 billion out of which Rs 1.430 billion has been sanctioned. According to Federal Tax Ombudsman (FTO), Company has misused incentives given to farmers/growers and has become biggest beneficiary and no benefit whatsoever has reached genuine farmer/growers.

It is further alleged that LTO, Lahore was not vigilant while SRO 1248(l)/2020 November 23, 2020 and SRO 563(l)/2022 April 29, 2022 are being grossly misused to get huge fraudulent refunds. Dr. Asif Mahmood Jah Federal Tax Ombudsman Islamabad directed Chief Commissioner IR, Large Taxpayers Office Lahore to report compliance with case against Millat Tractors Limited within 90 days by conducting an exhaustive review so as to ensure that section 2(44) and section 23 of Sales Tax Act, 1990 and all relevant SROs governing tractors manufacturing sector are implemented in letter and spirit.  To verify contents of complaint especially challenging genuineness of input tax claimed by Millat Tractors and also verifying genuineness of farmers. In addition, DG Anti-Benami Initiative FBR is directed to probe incidence of benami transactions in tractors manufacturing sector.

Shahzad Riaz from Shahzad Trade Links Karachi filed complaint against Millat Tractors Lahore, Secretary, Revenue Division, Islamabad and Chief Commissioner IR Lahore. Complainant alleged that he had booked 1,001 agriculture tractors from MTL on June 21, 2022, paying in advance full consideration amounting to Rs 1,00o million including 5 percent Sales Tax (under serial number 25 of 8th Schedule of Sales Tax Act, 1990), through ninety-one pay orders. However, MTL only delivered 47 tractors to complainant in month of June 2022 and failed to deliver remaining 954 tractors even after expiry of 60 days. Delay in delivery beyond 60 days is tantamount to violation of SRO 837(1)/2021 June 30, 2021.

MTL deliberately issued Sales Tax invoices at rate of 5 percent to fake persons (fake growers/farmers) having no nexus with whole transaction. In bulk of cases bookings were actually made by commercial entities/investors/dealers, who are involved in purchase and sale of tractors commercially on commission or profit basis.  Under relevant law, no refund is admissible in cases if tractors are sold to persons other than individual growers/farmers having agricultural land. Therefore, Sales Tax invoices were issued in name of dummy farmers/growers by misusing pay orders of dealers and investors with sole purpose to get fraudulent refund. According to FTO, LTO Lahore failed to verify genuineness of refund, authenticity of buyers and specific cases of fake invoices and alleged tax fraud, wherein MTL is legally not entitled to claim refund as per conditions on account of persons being non-growers and non-farmers. Basic goal and purpose of government was to provide benefit to genuine growers and farmers by allowing them concessionary rates of 5 percent Sales Tax. 

Published in The Daily National Courier, November, 25 2022

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