The Hyderabad Central GST intelligence wing encountered eight companies which are exhibiting bogus invoices without an actual supply of TMT bars and other products, In the raid conducted by GST department on iron and steel industries in the State.
The fake invoices spawn by these companies showcased a huge amount of about ₹1,289 crore. The fake input tax credit (ITC) also carries a big amount of ₹224 crore, which these companies used to pass to other taxpayers within the same group and other taxpayers since July 2017.
Out of the eight faulty firms, five are trading from similar address with many common directors, partners, and proprietors.
GST Hyderabad Central Principal Commissioner M. Srinivas in a press release said that they have excavated various accusatory documents during the investigation processed at the residential & business premises of these companies.
The release unfolds that companies are not just generating fake invoices but also imbibed together in unfair practices, participating in circular fraudulent trading just to increase their turnover. The erring companies generated e-way bills attesting it with the forged invoices issued by them. At the same time, some e-way bills are also detected as fake because the vehicles shown in the bills does not qualify the carrying capacity needed to carry the quantity mentioned in the invoices.
Banks Swindled – False claiming of ITC
Sources revealed that issuance of fake GST invoices i.e only invoices without any actual/ physical movement of goods is the sole motive behind adopting this modus operandi by these firms means the creation of false itemized bills without any actual delivery of TMT bars to the rest of the participants in this network. Moreover, many of the companies participating in the game, are found operating from the same building on the same floor in Jubilee Hills, Hyderabad. The same firms are playing the roles of suppliers as well as buyers of these TMT bars.
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Mr Srinivas states that investigation is evidential that this mode of operation is followed to befool to the banks to falsely claim the ineligible credit facilities or Letters of Credit (LCs), in the absence of any collateral securities. The release confirmed the incarceration of an individual followed by the restoration ₹ 17.75 crores.
By depicting the fake delivery as the genuine supply of TMT bars to other players, they are simply passing on the disqualified input tax credit to others who in turn contributes the same for them, thus boosting the circular fake trading.
Employees Admittance – Fake Transactions
Some more facts came on the surface when the investigation was dug deeper at residential and business premises of the companies where employees denied any such actual supplies and admitted that these transactions are only paper activities without being backed by any practical tangible tasks.
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The GST official mentioned that Section 132(1) b of CGST Act 2017 states the issuance of invoices without any actual supply of goods is subject to legal violation and this offence is a cognizable and non-bailable under Section 132(5) of CGST Act 2017 if the value of tax evaded is more than ₹5 crore (Section 132(i) of CGST Act 2017).
