The Department of Revenue Investigation has discovered a number of much more business entities and then companies issuing and purchasing fraudulent VAT receipts during its probe into VAT scam.
On March 3, the department had submitted a case at the Kathmandu District Court against 24 individuals associated with 24 firms on charge of evading taxes amounting to Rs1.75 billion by producing and issuing fake VAT bills.
As the investigation moves ahead, the number of companies involved in the scam has doubled.
“The lots of such firms has reached around 50, however we are now still to ensure whether they are part of the same racket, whose members are currently facing trial,” stated Dirgha Raj Mainali, director general of the department.
The number of companies purchasing fake VAT receipts has also enhanced from the previous 478 to 500. “The number could increase as the investigation furthers,” claimed Mainali.
The department has not still filed a case against the companies accused of purchasing fake receipts. Many of these companies are contractors, multinational firms , hydropower developers and hospitals.
The VAT scam has added burden to the government that is definitely struggling to meet its revenue target. During the first six months of the current fiscal year 2018-19, the government gathered revenue amounting to Rs402.45 billion against the target of Rs429.58 billion, in accordance with the Finance Ministry. The VAT racketeers, in the meantime, made huge benefits.
Even though the department discovered taxes evasion of Rs1.75 billion through fake transactions of Rs2.5 billion, the racketeers’ fake transactions by issuing fake VAT bills could cross Rs4 billion, in accordance with the department.
“The amount of tax evasion is bound to go up after now we have investigated into the companies that had purchased fake VAT bills,” Mainali stated.
During the investigation on the first 24 companies, it had been discovered that the racketeers had suborned very poor workers and farmers and then used their names to register companies and open bank accounts.
The department has noticed Jaya Kishore Sah as the lynchpin of the racket and Parameshwor Shah , Mukesh Kumar Jha, Devraj Upadhyaya, Toyanath Adhikari, Subodh Sah and Pradeep Sah as his close associates.
A very similar fraudulent VAT bill scandal was exposed nearly a decade ago when the Inland Revenue Department (IRD) found fake VAT receipts in possession of two firms that sold mobile phones. In November 2010, authorities arrested by the police some persons engaged in fake VAT bill transactions. It had been then demonstrated that the country had lost an estimated Rs 6.59 billion to the VAT scam in which even big business houses were involved. The IRD had also brought 518 firms under its watch.
Many of the cases involved with fake VAT bills were settled through the Revenue Tribunal, Kathmandu, and a lots of them have reached the Supreme Court. The latest incident signifies that the country has failed to stem revenue evasion through fake VAT bills.