Federal Tax Ombudsman has instructed the Director General of Intelligence and Investigation (I&I), Inland Revenue, to take immediate action against cybercriminals involved in a Rs. 133.125 million fake supply fraud. The directive includes identifying and apprehending those who exploited IP addresses to insert fraudulent supplies into the official supply chain, and tracing the actual individuals behind VPN usage to conceal their activities.
The case surfaced when a 68-year-old commercial importer, registered for sales tax since August 5, 2008, attempted to file his April 2025 sales tax return. During this process, it was discovered that his password ID had been compromised. Cybercriminals had fraudulently updated his form on April 29, 2025, and filed the sales tax return on May 1, 2025. This unauthorized filing introduced fake supplies worth Rs. 133.125 million through Annexure-C, with a sales tax impact of Rs. 23.962 million.
An additional order from FTO confirmed the fraudulent use of the taxpayer’s credentials, classifying the incident as maladministration. The manipulation also caused complications in filing returns for subsequent tax periods. FTO directed Federal Board of Revenue to instruct Chief Commissioners-IR, RTO Quetta, to commence legal proceedings for the conviction of all individuals involved. The DG I&I was assigned to determine whether the culprits were internal or external actors and to enhance investigative capacity for tracing VPN-based offenders.
The Commissioner of RTO Quetta acted swiftly to protect government revenue. However, FTO stressed the need for further legal steps, including lodging an FIR, as outlined in Sales Tax General Order No. 12 of 2023 for cases involving fake or flying invoices.
Investigations identified M/s Rafi Enterprises, a taxpayer under RTO Quetta, as a beneficiary of the scheme. The company knowingly acquired fake invoices without any actual movement or exchange of goods, and without making payments in accordance with Section 73 of the Sales Tax Act. The evidence indicated the beneficiary acted with full knowledge of the fraudulent nature of these transactions, intending to evade sales tax obligations.
FTO noted that the current weak enforcement regime has encouraged unscrupulous taxpayers to profit from the illegal trade of fake invoices without fear of detection. Such practices undermine the principle of self-assessment in sales tax law, which depends on taxpayers submitting truthful and accurate declarations.
To preserve this trust and ensure compliance, the law provides for penalties and prosecution. FTO emphasized that once tax fraud is established against all ultimate beneficiaries of fake or flying invoices, authorities must proceed with registering an FIR. Furthermore, these cases must be pursued aggressively through the prosecution phase to set a strong deterrent against future violations.
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