₹110-crore GST fraud at six firms; one held

The officials of an anti-evasion wing of the Central Goods and Services Tax (CGST) unearthed a fraud, in which six companies in the city violated laws to earn undue

The officials of an anti-evasion wing of the Central Goods and Services Tax (CGST) unearthed a fraud, in which six companies in the city violated laws to earn undue profits, thereby causing a loss of revenue worth more than ₹110 crore to the Government of India. The fraud came to light after Majana Ram, the proprietor of one of the firms was arrested on Friday, for allegedly availing the input tax credit worth ₹12.10 crore, by showing fictitious physical inward supply [receipts of purchasing goods] in his GST returns.

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The six accused companies allegedly issued bogus invoices of purchase and sale to the government without actually supplying the goods, to pass the fraudulent credit of Input Tax Credit (ITC) to other companies, to avail profits. Input tax credit is an option that allows entrepreneurs to claim rebates for the taxes paid on the purchase of their goods.

“The investigation has revealed that all the accused entities together flouted the laws and claimed ITC worth more than ₹110 crore by forming coterie and helping each other in issuing bogus invoices without actually supplying any goods to pass on the benefits of ITC to other companies,” a GST official said.

On Friday, after receiving a tip-off, GST officials initiated inquiries against the private firms. GST officials visited these companies and discovered that most of their registered premises were residential or did not exist at addresses mentioned in their registrations as ‘place of business’. On visiting Ram’s iron and steel trading firm, Omkar Enterprises, at Girgaum, GST officials discovered that the accused was operating from his residential premises. Ram in his statement later admitted that his firm did not have a godown. He also said that he was aware that laws were being flouted and that his firm had not purchased or supplied goods and all the transactions pertaining to purchase and supply were only on paper.

GST officials said that Ram could not give a satisfactory explanation on the undue availing of ITC worth ₹12.10 crore by his firm, by showing fictitious receipts in his GST returns. The accused also could not explain how the supplies were made to some firms – Shubham Steelage, Pioneer Overseas, Tirupati Ispat Industries Private Limited, Skyorient Ferromet Private Limited and Paramount Metal Corporation – which are non-existent entities.

GST officials believe that these companies are dummy entities floated to carry out paper transactions without the actual movement of goods.

The probe revealed that Ram played an important role in the racket to pass the ITC rebate to the other firms in a fraudulent manner by issuing bogus invoices without the actual supply of any good and also by availing ₹12 crore for his own firm.

Ram has been charged under the relevant sections of Central Goods and Services Act, 2017. A local court remanded him in judicial custody. GST officials are investigating the case further and are on the lookout for others accused.