Kathmandu, December 19

The Department of Revenue Investigation (DRI) has filed a case against Varun Beverages (Nepal) Pvt Ltd — a multinational company — on allegations of issuing fake value added tax (VAT) bills.

Filing a case at Kathmandu District Court today against seven former and present directors of the company, the department has sought nearly Rs 1.95 billion in principal amount and penalties.

The DRI is seeking to recover Rs 649.60 million in principal amount, along with a fine that is double the principal amount or nearly Rs 1.30 billion, from the company.

The department has also urged the court to consider jailing the directors of the company for up to three years, as per a provision in the Revenue Leakage (Investigation and Control) Act-1995.

The defendants in the case filed by DRI today include Amit Gupta, Ravikanta Jaipuriya, Rohit Kohli, Prabin Kumar Agrawal, Vinod Kumar Singh and Ashok Kumar and the company itself.

The case filed at the district court today was a culmination of a four-month-long investigation on Varun Beverages (Nepal), according to Dirgha Raj Mainali, director general of DRI.

According to him, the department had initiated the probe based on a tip-off that the company was engaged in VAT bill scam that amounted to millions.

While the department had until now seemingly only targeted small companies, Mainali said, “Now, we are expanding our probe into large sized firms too, including other multinational companies.”

The case has come to light at a time when the government has been struggling to meet its VAT and income tax collection targets. The VAT and income tax shortfall in the first four months of fiscal 2019-20 stood at around Rs 21 billion.

In the period between mid-July and mid-November, the Inland Revenue Department (IRD) collected revenue amounting to Rs 104 billion, which was 83.2 per cent of the set target. Of the IRD’s annual revenue collection target of Rs 506 billion set for the current fiscal, the target for the first four months was Rs 125 billion.

As per section 4 (A) and (B) of Revenue Leakage (Investigation and Control) Act-1995, the DRI has already seized the bank guarantee of Rs 1.60 billion of Varun Beverages before the case was filed at the Kathmandu District Court, informed Mainali.

During the investigation, the DRI discovered that the company had been issuing fake VAT bills while conducting business with its business partners between fiscal years 2013-14 and 2018-19. The department has said that the company was able to evade VAT amount worth Rs 253.40 million and Rs 396.15 million in income tax and dividend during the five years.

As per Mainali, the Rs 1.95 billion that the department is trying to recover is by far the largest amount in terms of VAT bill scam.

The DRI registered 28 cases against 76 individuals related to VAT and income tax scams and sought recovery of Rs 10.29 billion in principal amount and fines in the first four months of the current fiscal.

The department has till date filed cases against 515 individuals on VAT and income tax scams and sought nearly Rs 37 billion in principal and penalties along with three-year imprisonment of the accused.