The Central Goods and Services (CGST) Department has busted a racket of fake firms, which allegedly misused gift cards issued by banks and pocketed the commission of Rs 30 lakh over the past 10 months.
As part of its marketing strategy, banks issue prepaid instruments, also known as gift cards, to companies after the submission of KYC documents. The firms then issue the gift cards to their employees for the purchase of goods and services. Each card is worth Rs10,000 and the company earns 2 percent (Rs 200) commission on every card.
Sources say 15 lakh cards were issued on fake KYC documents and swiped at the point of sale (POS) in the past 10 months in Hisar and Fatehabad districts. The firms redeemed the value of the cards without the actual purchase of goods or services. In this case, it was Rs 1,500 crore and in the process pocketed the commission (Rs 30 crore). The firms also did not pay 18 percent GST on the cards.
Sources say of Rs 1,500 crore transactions, nearly Rs 200 crore took place during the lockdown (from March 22 to April 20). About 1,000 cards were swiped at POS in one night. Sources say several cards were swiped at petrol pumps during the lockdown, when the movement of vehicle was minimum.
The department smelt a rat on June 11 when a Hisar-based exporter came to the GST office for the refund of input tax credit. “He revealed he received gift cards worth Rs 3.3 crore from banks and redeemed them himself. On getting the lead, the probe was launched,” said GST Superintendent Joginder Singh.
He said, “The gift cards were swiped to redeem the amount in bank accounts of fake firms without any purchase. It is a violation of the RBI guidelines and evasion of GST.” The case will be filed under the GST Act on the completion of the inquiry.