Amid gaping holes in the Goods and Services Tax (GST) system, the Rourkela Commissionerate of Central GST (CGST) and Excise department are witnessing an upsurge in tax evasion and fraud. With the elimination of physical verification of business firms in the new GST regime coming as Godsend opportunity for the unscrupulous elements, the departments are visibly grappling to pick up frauds from the massive transaction volumes. From October 2018 to May 2019, the CGST intelligence wing and Rourkela Commissionerate have detected three major frauds with the arrest of four local businessmen. The errant traders, Kamal Paari, Manas Chandra Baral, Narayan Khaitan, and Sanjiv Singh, were found to have duped the Central exchequer of a whopping Rs100.84 crore. All are accused of issuing and receiving fake invoices through fake business firms with no real transactions and audaciously availing Input Tax Credit (ICT).
In March 2018, the officials had seized Rs 85 crore from some business firms involved in tax evasion while Rs 3 crore were recovered from other firms for non-filing of returns. A senior CGST official pointed out that before the CGST regime, any business for registration had to submit authentic address and layout of their business point and godown along with fulfilling other paraphernalia which was followed up with physical verification. This used to act as a deterrence. But in the new CGST regime, any dubious businessman can get registration with online uploading of documents. Except in select cases, physical verification has been waived off, he mentioned. Another official said most of the frauds are done by proprietorship firms registered with the CGST. The GST system itself is complex and in online monthly return filing involving voluminous transactions, fake documents get inserted to claim ICT. The system does not automatically detect fake transactions. Any fake transaction could either be detected in a periodic audit or through careful scrutiny using extensive data analytics technology, he stated.
Former Rourkela MLA Pravat Mohapatra recently wrote a letter to Prime Minister Narendra Modi demanding a high-level inquiry into CGST frauds involving well-knit rackets. Mohapatra claimed that many dubious producers and traders in steel, iron, and minerals and other commodities have taken CGST registrations using their employees and faceless entities. After committing fraud, the fake business firms get closed in six months, he pointed out. Mohapatra alleged that Rs 10,000 to Rs 12,000 crore CGST frauds are taking place annually under the jurisdiction of Rourkela Commissionerate covering 12 districts.