Sales tax evasion via flying invoices estimated at Rs 5-6 trn

Sales tax evasion through fraudulent flying invoices, irrelevant invoices, is estimated to reach around Rs 5-6 trillion.

According to a report published by BR, while fake invoice usage has diminished due to enhanced system checks, “flying invoices” form of tax fraud has seen an uptick largely due to simplified sales tax registration process. It is estimated that Rs 5-6 trillion in sales tax revenue has been evaded through the illicit use of flying invoices.

Instances of "flying invoices" vary in nature. Some cases involve legitimate input registrations combined with unregistered outputs within the supply chain, while others entail registered outputs paired with unregistered inputs.

In an attempt to manipulate the system, fraudulent entities have registered with the Federal Board of Revenue (FBR) to engage in paper transactions. These perpetrators file counterfeit sales tax returns on behalf of fictitious companies, claiming illegal input tax against bogus invoices. This widespread use of flying invoices has resulted in substantial revenue losses for the national treasury.

To combat this issue, investigating agencies have been apprehending inter-province gangs involved in these fraudulent practices, ultimately aiming to curb significant revenue losses incurred by the national exchequer.