The indirect tax department that had arrested many promoters for circular trading and escaping goods and services tax may have to rethink its strategy after the Mumbai High Court granted bail to many of them. The arrests came after the indirect tax department issued notices in February this year and raided premises of several companies for allegedly inflating turnover through fake invoices to shell companies.
People close to the development said that several promoters then approached the criminal bench of the Bombay High Court which granted them bail and sought an explanation from the department. Bail was granted to different people in the past few weeks. Some industry observers suspect that circular trading may be used to inflate turnover or for bringing in black money to system. Tax experts, however, pointed out that this doesn’t necessarily mean tax evasion and that some genuine businesses are facing trouble on this count.