GST scam: Absence of physical verification emboldens fraudsters

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Lack of a mechanism entailing physical verification of business entities has led to a rise in GST frauds throughout the state, and Rourkela is no exception. The increasing number of fraud cases reported from the city have become a cause of big concern for GST officials while bleeding the Central and State exchequer of crores of money.

A team of officials from Bhubaneswar zonal unit of Directorate General of GST (Intelligence) (DGGI) on Wednesday had arrested businessman Santosh Gupta (45) of the city for raking input tax credit (ITC) of Rs 40.66 crore by raising fake purchase and sale invoices of Rs 262 crore.

Three days back, a roadside kiosk owner Kartik Kamila (40) found his address was used as the registered office of a dummy firm, Lingraj Trading. The firm owned by one Dambrudhar Bhumij committed the fraud worth crores. Kamila did not know anything about the firm. Similarly, a plumber of Basanti Colony said his name was mentioned as the proprietor of a firm involved in State GST fraud worth crores.

Sources said when the indirect tax regime was introduced in July 2017, it allowed online registration of business entities through uploading of documents. Except in a few select cases, physical verification of business firms was fully waived off. The GST system itself is complex and voluminous transactions get entered online every month for return filing to claim ICT. Such frauds are detected only through tedious periodic audits and careful scrutiny through an extensive data analytics technology.

In August this year, city businessman Kashmira Agarwal was arrested for State GST (SGST) fraud of Rs 129 crore through fake sales and purchase invoices of Rs 712 crore, while in January 2020, Amit Beriwal and Subash Chandra Swain were nabbed for similar SGST fraud of Rs 212 crore.

Sources stated this is just the tip of the iceberg. It is believed the modus operandi of the fraudsters is to steal identities of people from the lower strata of life, create multiple fictitious business entities and fake bank accounts to commit fraudulent transactions. 

Rourkela Commissioner of GST and Central Excise Vijay Rishi said from August 21, physical verification of business entities has become mandatory. However, physical verification of all registered CGST and SGST firms remains a challenge.

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