VAT evasion through the use of fake receipts is a serious crime, reiterated Finance Minister Pun at program in Nepalgunj. “The state will take action against them at any cost; we will not hesitate over who is involved in such activity,” he said.[break]
The fresh commitment from the finance minister came a day after the Ministry of Finance (MoF) made public the names of 437 firms, including those belonging to big corporate houses such as Chaudhary Group, Golchha Organization and Kedia Group.
Under the racket which was uncovered about a year ago and was last estimated to involve over Rs 10 billion (over US$ 135 million), the Inland Revenue Department (IRD) had found entrepreneurs either buying genuine VAT receipts from smaller firms or using printed receipts of some other registered traders (without their knowledge) to create fake transactions.
Through such practices they had managed to show higher costs and thus cut tax liability, said Finance Secretary Krishna Hari Baskota, adding that the IRD has already established that 365 firms evaded billions in VAT and other tax, and slapped VAT and fines of Rs 3.45 billion on them.
Worse still, acting on the basis of the fake VAT receipts and customs documents, some of the firms even claimed VAT refund, siphoning funds from the national treasury without contributing a penny to it.
Sarita Enterprises, for instance, had received VAT refund of Rs 5.5 million, and Sarita International, Rs 5.3 million. Likewise, Ashutosh Impex received Rs 17.2 million and Shiva Shakti Impex, Rs 16.9 million, while Digambar Trade House reclaimed Rs 11.26 million, Digambar Trade International received Rs 45.6 million and Bhimeshwar Trade House, Rs 14.3 million in VAT refund on the basis of the forged bills.
Though big corporate houses like Chaudhary Group and Golchha Organization have knocked on the doors of the Revenue Tribunal, senior IRD officials said they were confident of a verdict in their favor.
“VAT and fines slapped on them are backed by solid evidence. Even the administrative review that the IRD director general carried out in response to their appeals has upheld our tax and liability assessment against them,” said a senior IRD official.
Big houses flay govt action
- “The allegation that firms that pay Rs 1 billion in revenue took all that trouble to evade just Rs 12.6 million is ridiculous” --Chaudhary Group
- “I would readily go to jail if the authorities prove Him Electronics issued fake VAT receipts” -- Shekhar Golchha.
- “FNCCI welcomes disclosure of tax evader names. But as some of the firms have knocked on the doors of the Revenue Tribunal, it would be unfair to tag them as wrongdoers right now” -- Suraj Vaidya.
KATHMANDU: Big corporate houses, whose firms were named publicly on Sunday for evading value added tax through the use of fake VAT receipts, decried the disclosure, charging the government of not respecting taxpayers´ right to confidentiality.
Some of them even challenged the government to prove their involvement in the fake VAT receipt scam, which is estimated to involve Rs 10 billion (US$ 135 million). Others portrayed themselves as innocent, arguing that they were dragged in not because of their own wrongdoing, but because the vendors (from whom they bought products and services) played foul by not paying the government the VAT paid to them.
For instance, the Chaudhary Group, three of whose business units - CG Foods, CG Impex and CG Electronics - were named in the VAT receipt scam, said its firms have never issued fake bills. “Rather, they landed in a mess because their vendors had either used the fake receipts or did not pay the VAT paid to them,” it said.
The group has admitted that CG Foods, CG Impex and CG Electronics have been slapped tax and fine worth Rs 4.7 million, Rs 4.4 million and Rs 3.5 million respectively.
“Chaudhary Group presently contributes Rs 5 billion to the national treasury. Of that, Rs 1 billion is contributed by these three firms alone. So, the allegation that firms that pay such huge revenue would take all that trouble to evade just Rs 12.6 million is ridiculous,” the group said in its statement.
The group even accused the government of ignoring cases of tax evasion going on for years and targeting big firms only. “We urge the government to investigate all those cases of VAT evasion,” its statement reads.
Similar was the statement from Shekhar Golchha, director of Golchha Organization, whose Him Electronics featured in the VAT evaders´ list. He said Him Electronics had taken VAT credit because it considered that vendors that supplied it with various goods and services had issued genuine VAT bills.
“If the bills turned out to be fake or the vendors did not file the VAT they were paid, it´s not our fault. Sadly, this is what the government has accused us of,” Golchha told Republica.
He even said that he would readily go to jail if the authorities prove that Him Electronics issued fake VAT receipts.
Not surprisingly, most of the entrepreneurs identified in the tax evasion scam had the same story as Golchha or similar ones: they were victims themselves and not culprits. The wrongdoing was attributed to the vendors, who were not traced.
Contrary to the reaction of big corporate houses, President of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Suraj Vaidya welcomed the naming of firms evading VAT.
“FNCCI has always stood in favor of making public the names of tax evaders. But I would like to add that some of the firms have knocked on the doors of the Revenue Tribunal and it would be unfair to tag them as wrongdoers now,” he stated.
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