The Federal Board of Revenue has finalised a sales tax demand of Rs18.21 billion against Millat Tractors Ltd following an inquiry initiated on the directives of the Presidency.
As per details, the case pertains to an investigation by the FBR into alleged sales tax evasion by Millat Tractors under benami laws. The company had challenged the FBR’s action before the Federal Tax Ombudsman, which issued three orders against Millat Tractors during 2022-2023. Subsequently, both the company and the FBR filed a total of seven appeals with the President between January 31 and March 2023.
On November 11, 2023, the President directed the FBR to resume its investigation against Millat Tractors over claims of inadmissible sales tax refunds exceeding Rs12 billion related to benami transactions for the tax period 2018-2022. A compliance report submitted by the Large Taxpayer Unit Lahore to the President of Pakistan recently confirmed that a demand of Rs18.21 billion has been created against the company in line with the recommendations of the Federal Tax Ombudsman.
The report states that the sales tax audit for fiscal year 2021-22 has been concluded under Section 25 of the Sales Tax Act, 1990. It highlights an unlawful claim of input tax under Section 8 of the Sales Tax Act amounting to Rs169.10 million, with an additional penalty of Rs8.45 million. The short payment of sales tax by misusing SRO.563(I)/2022 stands at Rs1.30 billion, along with an equal penalty of Rs1.30 billion. The non-payment of sales tax on advances received from customers totals Rs214.22 million, with an additional penalty of Rs10.71 million. Moreover, the inadmissible input tax claims due to non-compliance with Sections 7, 8(1)(ca)(d), and 73 of the Sales Tax Act, 1990 amount to Rs5.66 billion.
The Large Taxpayer Unit Lahore has now submitted its report to the Federal Tax Ombudsman, seeking approval to initiate tax recovery proceedings. With the findings now formalised, the case is expected to enter its next phase, which could have significant implications for the company. The FBR’s investigation into Millat Tractors is part of a broader effort to clamp down on tax evasion and irregularities in the corporate sector, reinforcing the government’s commitment to improving tax compliance and financial transparency.
