KATHMANDU, Nov 16: Nineteen firms against which the Inland Revenue Department (IRD) has slapped Rs 674.18 million in VAT and penalty for tax evasion by using fake VAT receipts have moved the Revenue Tribunal, challenging the IRD´s verdict.
Firms that approached the quasi-judicial body include CG Impex, CG Electronics, AIT Pvt Ltd and Arun Intercontinental Enterprises of Chaudhary Group; Him Electronics of Golchha Group; Varun Beverages Nepal -- the multinational bottler of Pepsi and other carbonated drinks; MAW Enterprises and CGGC Chamelia Project among others.
“Over one and half a dozen firms have approached us for judicial review. Together the firms have 38 cases of fake VAT receipts and tax evasion established against them,” said Bhim Kumar Shrestha, registrar of Revenue Tribunal, Kathmandu.
Dipak Kumar Karki, chairman of the tribunal and Judge at Appellate Court Patan, said the tribunal has already asked IRD to forward dossier of the applicant firms. “Our bench will take up those cases soon,” he told Republica.
These firms have mainly argued that they were not aware the receipts (that their vendors issued on purchase of goods and services) were fake ones while seeking VAT credit.
However, investigations by IRD have established that these along with other 350 firms had either bought VAT receipts of smaller firms or counterfeited VAT receipts to create fake transactions, thereby inflating costs and reducing their tax liability.
Worse still, acting on the basis of the fake VAT receipts and customs documents, seven trading firms even claimed VAT refund of Rs 116.06 million without contributing a penny to it. Those notorious firms were Sarita Enterprises, Sarita International, Ashutosh Impex, Shiva Shakti Impex, Digambar Trade House, Digambar Trade International and Bhimeshwar Trade House.
Together, IRD estimates that fake VAT receipt scam could run over Rs 10 billion (over $135 million). It has so far confirmed that 365 firms were involved in evasion of VAT and other tax and slapped Rs 3.45 billion in tax and penalty on them. But only seven of them have paid tax liability worth Rs 61.9 million established against them so far.
Investigations against over 100 firms are still on, according to a senior official at the Ministry of Finance.
Some 65 top business firms had approached the IRD for administrative review. But only 19 of them moved the tribunal for judicial review after IRD upheld tax and fines that the investigation officers slapped on them.
Meanwhile, officials of Revenue Tribunal cautioned they could take as much as two years to give final verdict on the cases, mainly as they have a huge backlog of cases, particularly because it remained without chairman for a span of a year till few months ago.
“We issued final verdict on 31 cases since the appointment of new chairman. But still we have about 774 cases to deal with,” said a tribunal official.
Given the complexities of the cases related to tax evasion, officials said they cannot rush through the cases just like that.
Such statement of tribunal officials makes clear that the IRD that showed its effectiveness and efficiency while investigating fake VAT receipt scam might need to wait for couple of years to recover the lost revenue.