Pharmaceutical firm director arrested for ₹158-cr GST fraud

Central Goods and Services Tax (CGST) officials on Wednesday arrested the director of a pharmaceutical company for violating GST laws and causing revenue loss to the tune of ₹158 crore to the Government of India.

Malad resident Pravinkumar Prajapati, director of Sulabh Pharmaceuticals Pvt Ltd, has been accused of fraudulently availing ₹158 crore as input tax credit on the strength of invoices without receipts of goods or services.

Input tax credit is an option that allows taxpayers to claim credit for taxes paid on purchase.

Based on specific inputs, CGST officials on Tuesday raided four places, including the office of Prajapati’s company, and seized incriminating documents.

Prajapati was booked under relevant sections of the Central Goods and Services Act, 2017. He was produced before a city court and remanded in judicial custody. CGST’s probe revealed that the accused opened 17 firms in his name and those of family members, friends, and employees. Later, only paper transactions were carried out by issuing invoices among these 17 firms without any sale, purchase, or supply of goods or services.

“This was done to inflate the turnover of his companies Dhruv Wellness Limited, Sulabh Pharmaceuticals Pvt Ltd, and Jayesh Lifesciences Pvt Ltd, and fraudulently avail inadmissible input tax credit,” said an official.

The invoices would be issued among 17 firms in a “circular manner”, the officer said. Prajapati indulged in such fraud practices to also obtain loans from various banks. He used the inflated turnover to convert his company Dhruv Wellness Pvt Ltd into a public limited company and artificially inflate value of its shares, another officer said.