CGST detects new way to evade tax, arrests director of Rao Edusolutions

The director was produced before a metropolitan magistrate court that remanded him to judicial custody till April 13.

Mumbai: Mumbai East CGST (Central Goods and Service Tax) Commissionerate has detected a new modus of tax evasion in the coaching classes sector. It suspects that M/s Rao Edusolutions Pvt Ltd, operating under the brand name Rao IIT Academy, has been collecting GST from students at 18% on the tuition fees, but has declared itself as unrelated and exempt services in the returns filed with the department.

The office of the coaching class is in the first floor of a building named Boomerang at Chandivali, Andheri (East). (Vijay Bate/HT Photo)

“The GST thus collected is believed to have been misappropriated in favour of the company,” said the CGST in a release issued on Saturday. The department on Friday arrested one of two directors of the company, under Section 69 of CGST Act, 2017 for allegedly contravening provisions of Section 132(1)(d), the release added.

The director was produced before a metropolitan magistrate court that remanded him to judicial custody till April 13. The GST, according to the remand application before a metropolitan magistrate court, was collected from students between April 2021 and February 2023.

The suspected evasion, according to the department, is more than ₹14 crore, making the offence cognizable and non-bailable under section 132(1)(i) of CGST Act, the release added.

During the enquiry, the CGST department also conducted searches at the office of Rao Edusolutions Pvt Ltd, at the residence of its directors and recorded statements of senior executives of the company. The enquiry, according to the remand application, revealed that though coaching was stated to be the main business of the company, which attracted GST at 18%, the company had shown barely 3% of its income from the coaching business and the rest from businesses like guard service and contract carriage etc. For which no GST is payable.

Besides, the department also suspects that the company has hidden a substantial part of their income from the department and thus avoided payment of GST.