KARACHI: The Federal Board of Revenue (FBR) has expressed concerns over no solution for preventing refunds or adjustment against fake input claims, official sources said on Thursday.

“The issue was discussed at a recent commissioners’ conference and the revenue body has asked senior officials to present viable solution,” an official at the FBR said on the condition of anonymity.

The FBR had detected Rs25-30 billion fraudulently obtained by fake claimants. “The revenue body is endeavouring to improve the capacity of electronic system to verify the records of claimants’ sales and purchases,” the official added.

At the commissioners’ conference, the director general, intelligence and investigation, FBR, said that around 600 fake companies and individuals defrauded the revenue authorities with the compliance of 13,000 genuine and registered companies, the official said.

“The fake companies or individuals presented the claims after completing all the requirements, including the challans of supplies and purchases,” the official said. “The fake entities first registered with the tax department and after receiving the refunds vanished within six months, leaving no record for the authorities for verification.”

“The registered companies also availed benefits in this scam as no supply and purchases were made with those fake companies,” the official added. Under the sales tax law, if the input tax paid by a registered person on taxable purchases made during a tax period exceeds the output tax on account of zero-rated local supplies or export made during that tax period, the excess amount of input tax would be refunded to the registered person.

The official said that the intelligence and investigation director general unearthed the scam recently, which resulted in lodging of an FIR against executives of several registered companies and recovery of around Rs3 billion.

However, the issuance of refunds against fake input claims are still going on, despite introduction of expeditious refund system, which was not possible without the help of the officials at the electronic system, the official said.

“The FBR is investigating involvement of officials in Pakistan Revenue Automation (Pvt) Limited, which is responsible for automation,” the official added. At the meeting, the commissioners urged the revenue body to check such leakages because it would hamper revenue collection efforts for FY12.

In the current fiscal year, the FBR is targeting Rs1,952 billion and collected around Rs842 billion in the first six months of FY12. The official said that the commissioners are unanimous on documentation of the economy because without this such incidents of leakages would happen in the future.

To check the issuance of refunds on bogus claims, the FBR had announced to undertake audit, but so far the exercise failed to materialise substantial amount. “The comprehensive audit in the electronic refund issuance is not possible because details provided by the claimants are fake,” another official at the tax department in Karachi said.