The Federal Board of Revenue (FBR) has initiated a detailed examination of the cement sector following the imposition of a substantial penalty on a major cement manufacturer.
This action stems from allegations that the company falsely claimed input tax deductions based on fraudulent coal purchase invoices.
Investigations uncovered a network of blacklisted firms engaged in deceptive transactions aimed at evading sales tax.
The FBR’s scrutiny intensified in response to these findings, leading to audits across the sector, including a review of another significant cement manufacturer by the Large Taxpayers Office (LTO) in Karachi.
The LTO’s assessment revealed that the cement manufacturer had improperly claimed input tax amounting to Rs 14,686,443, based on invoices issued by a blacklisted entity in September 2022.
The Internal Audit Inland Revenue (IAIR) flagged these suspicious transactions, indicating that the company had recorded fake purchases totaling Rs 1.6 billion, resulting in a sales tax loss of Rs 316 million for the national treasury.
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The investigation highlighted a complex scheme involving multiple suppliers, none of whom actually imported or sold coal.
The FBR confirmed that the involved parties had not made any coal imports, leading to a comprehensive penalty structure for the manufacturer, which includes repayment of the principal amount, additional penalties, and a default surcharge.
Despite multiple opportunities for hearings since December 2023, the manufacturer failed to provide the necessary documentation to support its claims, including invoices and proof of transactions.
This lack of compliance has raised concerns regarding adherence to the Sales Tax Act of 1990.
