FTO open investigation into fraudulent rebate of 954 tractors

FBR to investigate violation of Benami Transactions Prohibition Act 2017

LAHORE: The Federal Tax Ombudsman (FTO) has instructed the Federal Bureau of Revenue (FBR) to open an investigation on a fraudulent rebate of 954 tractors by benami growers with the fraud allegedly linked back to the tractor company itself. Media reports have suggested the fraud to be in excess of Rs 10 billion. 

The FTO uncovered the fraud on account of a complaint where the complainant alleged to have only received 47 of the 1,001 tractors they had booked for a total amount of Rs  1,252,851,600 (inclusive of 5% sales tax) through 91 pay orders. The complainant had highlighted how the order had been placed in June 2022, and the remaining 954 tractors had not been delivered. Failure to deliver the aforementioned remaining tractors, the complainant highlighted, was in violation of Section 9.1 of the Auto Industry Development and Export Policy (AIDEP 2021-26) whereby automobiles purchased have to be delivered to the buyer by the manufacturers within a period of 60 days. 

The order for the tractors was made under a previous agricultural scheme aimed to benefit farmers. However, the requisite Departments were unable to prove the authenticity of the transactions with the FBR unable to find the transactions adherence to the section 2(33A) of the Sales Tax Act, 1990. The FTO traced the 91 pay orders to 47 individuals with no connection to one another who circumvented authorised dealers to make the transaction. The case was then identified to be a violation of the Benami Transactions Prohibition Act, 2017. Practices such as this are employed to hide the identity of the actual buyers, who in this case would have masquerade as farmers. Fabricating their identity would have allowed the perpetrators to obtain the tractors on favourable terms, per the policy, use them for other commercial purposes, and avoid having taxes levied on their gains. 

The perpetrator has been suggested to be the company itself in the situation, however, details of the name of the company itself have not surfaced. There are many reasons to suggest that the company itself was the complainant, and had initiated the complaint to benefit from the gains it would make from the sales rebate. 

Firstly, the company did not register the 1,001 tractors purchased by the complainant in their sales tax returns for the month of June 2022. The company refuted claims of malpractice by stating that it registers the sale of tractors once they have been delivered to the buyer. However, the company was unable to provide a justification for not registering the 47 tractors that the complainant did receive within June 2022. 

Secondly, the company stated to the media and the Governmental bodies that the aforementioned section of the Auto Policy is only applicable on partial payments. However, the policy does not state this. 

The investigation into the entire matter is set to be conducted by the FBR in the coming days. 


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Daniyal Ahmad
Daniyal Ahmad
The author is a member of the staff, and covers the automobile, energy and advertising insdusties as a sector analyst. He can be reached at [email protected]


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