FTO Orders Millat Tractor for a refund of fraudulent Sales Tax charged

By Nasir Mahmood 

The Federal Tax Ombudsman Islamabad, Dr. Asif Mahmood Jah has directed the Chief Commissioner IR, LTO, Lahore to conduct a probe and report compliance within 90 days; into charging of Sales Tax (ST) at the time of booking of the tractor but not disclosed by Millat Tractor Limited while issuing invoices at the time of delivery of tractors, or while filing ST returns for the month of June 2022. He has been also ordered to ensure that relief granted by the legislature, through Finance Act, 2022 is passed on to the end consumers, wherever 5 percent ST was charged by MTL before 30th June 2022 but the delivery of tractors was made after 1st July 2022. 

According to the FTO order; the complainant is entitled to a refund of Rs93,500 by MTL as tax charged at the time of booking has not been paid to the state treasury. LTO Lahore must ensure that relief is granted to the complainant and other similar buyers with the same facts. LTO Lahore, the concerned field formation was in complete darkness but for the intervention of this office, and this “neglect, inattention, inefficiency and ineptitude in the administration or discharge of duties and responsibilities” is clearly tantamount to maladministration in terms of section 2(3)(ii) of FTO Ordinance, 2000. 

The above complaint was filed by Mr. Abaid Ullah District Sialkot against Secretary Revenue Division, and Chief Commissioner LTO Lahore alleging illegal charging of Sales Tax and then further overcharging an amount of Rs0.245 million on the purchase of a tractor by Millat Tractors Limited (MTL). 

The FTO findings disclosed that the acts of omission and commission were held by FBR authorities cognizable u/s 2(3)(ii) of FTO Ordinance 2000, visible from the contents of complaint & rejoinders, and not reasonably rebutted by concerned tax authorities. It said that non-declaration of the whole transaction and nonpayment of sales tax recovered from the payer/complainant MTL has contravened the sales tax Act and LTO Lahore failed to take any suo motto cognizance of this glaring default.  

The sanctity of FBR’s tax regime cannot be left solely to the market rather it needs to be upheld through strict vigilance, monitoring, and enforcement by field tax formations. Fraudulent overcharging in the garb of taxation is tantamount to tax fraud, the FTO said. The amount charged during the month of June 2022 as ST in this case and other similar cases but not deposited in the state treasury needs immediate intervention by the department. 

In the recent past, there were hundreds of cases wherein M/s Pak Suzuki Limited Karachi had charged ST @17 percent before 30th June but ST was reduced w.e.f. 1st July i.e. before delivery of vehicles. In said cases, FTO Office had raised the issue of excessive charge of ST. investigated it thoroughly and concluded that a refund of the excess amount is due to the end consumers who are entitled to a reduced tax burden.