The Department of Revenue Investigation has found several more businesses and firms issuing and purchasing fake VAT receipts during its probe into VAT scam.

On March 3, the department had filed 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 firms engaged in the scam has doubled.

“The number of such firms has reached around 50, but we are yet to confirm whether they are part of the same racket, whose members are currently facing trial,” said Dirgha Raj Mainali, director general of the department.

The number of companies purchasing fake VAT receipts has also increased from the previous 478 to 500.

“The number could go up as the investigation furthers,” said Mainali.

The department has not yet filed a case against the companies accused of purchasing fake receipts. Most of these companies are contractors, multinational firms, hydropower developers and hospitals.

The VAT scam has added burden to the government that is struggling to meet its revenue target.

During the first six months of the current fiscal year 2018-19, the government collected revenue amounting to Rs402.45 billion against the target of Rs429.58 billion, according to the Finance Ministry. The VAT racketeers, meanwhile, made immense benefits.

Although the department found tax 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, according to the department.

“The amount of tax evasion is bound to go up after we have investigated into the companies that had purchased fake VAT bills,” Mainali said.

During the investigation on the first 24 firms, it was found that the racketeers had suborned poor workers and farmers and used their names to register companies and open bank accounts.

The department has identified 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 similar fake VAT bill scandal was exposed nearly a decade ago when the Inland Revenue Department (IRD) found fake VAT receipts in possession of two companies that sold mobile phones. In November 2010, authorities arrested some persons involved in fake VAT bill transactions. It was then revealed 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.

Most of the cases involving fake VAT bills were settled through the Revenue Tribunal, Kathmandu, and a number of them have reached the Supreme Court.

The latest incident suggests that the country has failed to stem revenue evasion through fake VAT bills.