The directorate general of GST intelligence (DGGI) for the first time arrested a Chennai-based woman mastermind, running the racket of fake invoices to fraudulently claim input tax credit on the seventh day of its nationwide drive against the goods and services tax (GST) frauds, officials said.
The Chennai zonal unit of DGGI arrested the women as she was running a web of seven fake companies created and operated by herself in the names of her family members, including her recently deceased mother-in-law, relatives and friends, two officials with direct knowledge of the matter said requesting anonymity.
“A case was booked against her firm for availing and passing on fraudulent input tax credit (ITC) of Rs 14.87 crore on the companies’ fake invoices,” one of the officials said.
Explaining her modus operandi, the official said, “During the search operation at her eight premises in Chennai, it was also unearthed that the identity documents had been procured by her from relatives and friends for a payment of petty monthly sum.”
Besides her, the DGGI arrested five more persons including a chartered accountant in the latest drive, taking the total tally of GST fraudsters’ arrested so far to 36, which included three chartered accountants. The special drive, launched on November 9, 2020, led to 519 cases against 1,736 identified entities, a second official said.
The GST investigating authority on Thursday arrested two persons in the National Capital Region (NCR), two in Hyderabad, one in Chennai and one in Ahmedabad. Searches and surveys were conducted in 19 cities Chennai, Ahmedabad, Nagpur, Visakhapatnam, Siliguri, Patna, Bhopal, Surat, Hyderabad, Nagpur, Raipur, Bhubaneshwar, Jaipur, Ghaziabad, Ludhiana, Delhi, Bengaluru, Mumbai and Kolkata, the official said.
The government is also tightening the procedure for new GST registration to check frauds, the official said. “The businesses whose owners or promoters do not have commensurate income-tax payment records will require physical and financial verification before their companies can be given GST registration,” he said.
Explaining the menace, he said, fake invoices were not only issued for availing ITC fraudulently, but also used as conduit for nefarious activities leading to tax evasion, massive bank loan fraud, money laundering and hawala transactions. “These activities have been largely carried out by non-existent or fly-by-night firms and by using a network of firms to game the system to usurp ITC on commission basis,” he added.
These activities have been carried out, primarily, by those unscrupulous elements, who have exploited the ease of doing business conveniences in the existing system by getting a GST registration easily and quickly and later take advantage of the liberalised norm for grant of registration in GST, he said.