President Arif Alvi has instructed the Federal Board of Revenue (FBR) to resume investigations into M/s Millat Tractors Ltd (MTL) regarding an alleged inadmissible sales tax refund exceeding Rs12 billion obtained through “Benami” transactions for the tax period spanning 2018-2022.

During a press conference at the FTO Headquarters on Wednesday, Almas Ali Javinda, Advisor (Legal), Muhammad Nazim Saleem, Advisor (Sales Tax), and Muhammad Naseer Butt, Advisor (Income Tax), explained that the President has rejected representations from both the FBR and MTL, endorsing the FTO’s order to initiate recovery proceedings against the company.

FTO Advisor (Sales Tax) Nazim Saleem revealed that MTL had levied a 5 percent sales tax on tractor buyers but failed to deliver tractors by June 30, 2022, violating the ‘time of supply’ definitions in section 2(44) of the Sales Tax Act 1990. Despite violations, FBR officials overlooked the company’s actions.

Notably, sales tax on tractor supply was abolished starting July 1, 2022. When complainants sought refunds from MTL, their requests were denied, leading to complaints filed with the FTO.

The President’s order emphasized that the FBR has initiated post-refund and sales tax audits of MTL, ensuring a thorough examination of the matter.

FTO Advisor (Legal) Almas Ali Javinda stated that the President’s decision would benefit numerous farmers who overpaid sales tax to MTL for tractor purchases. Allegedly, MTL engaged in tax fraud through Benami transactions, using multiple individuals’ computerized national identity card numbers (CNICs).

Describing it as a “mega tax fraud,” Javinda mentioned the use of black money to claim a Rs12 billion refund through Benami transactions. The FBR has initiated recovery proceedings against the company, and criminal proceedings may follow upon verification of the fraud through audits.

FTO Advisor (Legal) highlighted that such transactions, disguised as engineered purchases by fake buyers, conceal black money investors’ details. The FBR has taken immediate steps to prevent the company from claiming new refunds, initiating audits for Tax Years 2018 to 2022 and halting further refund processing.

The President’s decision emphasizes non-interference in ongoing audit proceedings, ensuring the independence of the competent authority and providing MTL an opportunity to present their viewpoint for inclusion in the audit report.