MoF rejects TSC’s proposal to settle VAT scam cases

Kathmandu, July 26

The Ministry of Finance (MoF) has rejected a proposal tabled by the Tax Settlement Commission (TSC) — an independent body formed through a Cabinet decision in a bid to settle tax dues accumulated till fiscal 2012-13 — to settle cases related to the Value Added Tax (VAT) scam.

Submitting its report at the end of fiscal 2014-15, TSC had sought a term extension and also asked the MoF to grant it permission to look into the infamous VAT scam. Though the government has extended the term of TSC till mid-October of this year, the Commission has not been given the authority to look into the fake VAT bill cases.

The Cabinet meeting of July 17 had extended TSC’s term by additional three months. TSC had sought an amendment to its terms of reference to settle tax dues of firms that were found guilty of submitting fake VAT bills to evade payment of billions of rupees.

In 2012-13, big VAT-registered firms were found producing fake transaction bills in the name of fake firms, instead of filing VAT returns based on taxes paid by consumers of goods and services.

At that time, the Inland Revenue Department (IRD) had found that VAT fraud involving 518 firms was worth Rs 6.6 billion.

“Settlement of taxes determined by the tax administration in the fake VAT bill case does not fall under the jurisdiction of the TSC,” said Laxman Aryal, joint-secretary and head of the Revenue Division at MoF.

TSC has received numerous applications seeking settlement of the fake bill case. It received applications from 1,500 tax payers to settle revenue dues worth Rs 36 billion. Till the end of the last fiscal, TSC had settled only 250 cases other than those related to the VAT scam worth Rs five billion.

“A large chunk of tax dues is yet to be settled,” said Chuda Mani Sharma, director general of IRD and one of the members of TSC, adding, “TSC has prioritised the settlement of larger dues.”

Formed on 5 February this year, TSC will serve till mid-October and will have to settle 1,250 cases of taxpayers who are willing to settle their dues.

Sharma further clarified that TSC will not show leniency on taxpayers while settling taxes except for those firms that have been labelled as ‘sick’.

Till fiscal 2013-14, tax dues worth Rs 48.15 billion — Rs 20.02 billion from income tax and Rs 28.13 billion from VAT — were yet to be collected, but the TSC is authorised to settle tax dues accumulated only till fiscal 2012-13.