In a first-ever GST fraud case, two directors of forged private firms have been arrested by the officers of the Central Goods and Services Tax (CGST), Mumbai for allegedly availing false credit of GST. The reported businessmen claimed and availed input credit benefit of Rs 5.2 cr and Rs 2 cr by registering fake LCs and issuing fake invoices.
The invoices generated by the two directors were fake as the actual shipment of goods was never carried out. They only created invoices and exchanged the same to report fake sales and purchases on paper to avail GST tax credit. The case is more or less similar to what Nirav Modi and Mehul Choksi did by creating fake Letter of Credits (LCs) on fake purchases. However, this one was caught earlier.
Vinaykumar D Arya is one of the two culprits. He is director of VN Industries Limited based in Darukhana, Mazgaon, Byculla, Mumbai. Arya tried to cheat the government by availing a GST input credit of Rs 2.03 crore by filing fake invoices. He was arrested by the officers and was later released on bail, since his offence is under Rs 5 crore as per CGST Act, 2017.
Sanjiv Pravin Mehta, the second offender, is director of Shah Brothers Ispat Private Limited. His company deals in steel and is based in Parel East, Mumbai. Mehta claimed a fraud input credit of Rs 5.20 crore by showing fake invoices and therefore, he was arrested by the officers on a non-bailable offence.
Dr KN Raghavan, GST Commissioner, Mumbai Central, said, “The fraud came to light when we cross-checked with the suppliers, and they confirmed that they did not supply the goods. So, they were moving papers without moving the goods and availing credit from the banks. As per the GST Act evasion of duty above Rs 5 crore is a non-bailable offence. So, it will be applicable to Sanjiv Mehta, who will be produced before the magistrate. Both Mehta and Arya are part of the iron and steel sector and are involved in trading iron and steel implements.”
According to Manpreet Arora, additional commissioner of CGST Mumbai unit, the two were only exchanging invoices while not performing any real sale or purchase. All the transactions were on paper, and there was no actual movement of goods or services.
As per CGST law, anyone who is found responsible of issuing a GST invoice/bill without actually supplying concerned goods or services would be in violation of the rules related to wrongful availment of input GST credit and therefore can be arrested. This is exactly what was being done by the two culprits mentioned above, who were intentionally trying to defraud banks and exchequer by opening fake LCs.
