A network of 232 fake money-changing companies has been excavated by the Income Tax Department and detected tax evasion amounting to ₹1,000 crore via fraudulently generated Input Tax Credits under the Goods and Services Tax (GST) regime.
Furnishing the information of the bogus process, the Chairman of the Central Board of Indirect Taxes and Customs (CBIC), Sanjay Kumar Agarwal, stated that the incident was discovered when the Meerut CGST Commissionerate smashed a syndicate of firms fraudulently claiming ITC. ‘Interestingly, the investigation revealed that ‘Full Fledged Money Changer Companies (FFMCs)’ were used for parking/routing of funds generated through fraudulently passed on ITC without any real recipient of the foreign currency,” he added.
He mentioned that the accounts utilized for routing money have been attached provisionally. “Three persons have been arrested for their role in the entire fake billing racket,” he expressed.
A bogus GST e-invoice is directed that there is no actual supply of goods or services, it is just the issuance of the invoice which is bogusly utilised to claim the ITC. Corrupt details misuse the identity of other persons to receive the bogus registration under GST to cheat the Government.
These bogus registrations are employed to pass fraudulently on input tax credits to corrupt receivers via issuing invoices without any underlying supply of goods or services or both. Bogus registrations and the fake invoices issued to pass the bogus ITC have become a severe issue, the government witnessed a loss in revenue due to fraudulent people engaging in dubious and complex transactions.
In Uttar Pradesh, a scam was excavated with fraudsters using hand pumps to avail bogus refunds utilizing Inverted Duty Structure (IDS) under the GST means. From the tax on the final product taxes on inputs can be deducted, and the net is deposited with the Government.
Under IDS it is not feasible, for the inputs to draw tax at an elevated rate and it is lower for the final product. Therefore beneath IDS, the assessee obtains the refund. Only certain goods under GST are counted under the class of IDS, and a hand pump is among them.
A case is been booked by the Lucknow Zonal Unit of the Directorate General of GST Intelligence (DGGI) after officers gathered that three Agra-based assessees were allegedly claiming the bogus ITC on the raw material for manufacturing hand pumps. The bogus input tax credit on raw materials (attracting GST at 18 per cent) was utilized to issue fake invoices of hand pumps (attracting GST at five per cent) to non-existent entities without any real manufacturer and supply. A total of 15.27 crore of evasion was detected, out of which ₹5.21 crore was deposited voluntarily by the charged.
Some examples of using fake firms for evasion. Before, the Finance Ministry identified over 29,000 fake firms and over ₹44,000 crore of GST tax evasion witnessed in a nationwide drive between May and December of 2023. It was prepared that information on such recognized doubtful GSTINs, jurisdiction-wise, would be communicated with the related State/Central Tax administration to start a verification drive and use critical action. If, after detailed verification, it is discovered that the assessee is non-existent, the action shall be taken for suspension and cancellation of the GST registration of the taxpayer.
For blocking the ITC in the electronic credit ledger the case might be investigated. Measures will be opted to find out the receiver to whom this non-existence assessees has passed the input tax credit, find out who is the leader, and act as per that.
