Revenue Dept lens on GST refunds from 2017 as data analytics reveals 931 fraud cases

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With GST evasion on the rise, the Revenue Department has turned to data analytics and unearthed 931 cases of fraudulent refund claims. It has now tasked the GST Data Analytics Wing with scrutinizing all past and current refund claims filed all over the country for an inverted duty structure. Refunds of over 28,000 crores are said to have been filed by over 27,000 taxpayers so far on account of the inverted duty structure in the current fiscal year.

These taxpayers, who have purchased goods from tax-evading non-filers, would face verification and scrutiny, sources added. This exercise is being monitored every week by Revenue Secretary Ajay Bhushan Pandey, official sources added.

ITC frauds

To curb Input Tax Credit (ITC) frauds, data analytics is to being used to re-look at all refunds since 2017, keeping an eye on the modus operandi of unscrupulous refund claimants or fly-by-night/shell business entities to get fake ITC.

GST formations have booked 6,641 cases involving 7,164 entities till November last year and recovered around 1,057 crores. The maximum number of such cases for ITC frauds has been booked in the Kolkata zone followed by Delhi, Jaipur, and Panchkula (Haryana).

The scrutiny exercise was set off by the recent detection by Central tax authorities of fraud in Delhi, involving GST refund for inverted duty structure. The case was deliberated upon at the 2nd National Conference on GST last week.

Fake ITC credit case

Sources said that investigators in Delhi, using data analytics, busted a major fraud case, where a network of over 500 entities of fake billers, intermediary dealers, distributors and bogus manufacturers of Hawai chappals had been created to claim and encash fake ITC credits.

The bogus “manufacturers” in Uttarakhand were supplying to fictitious entities and retailers in Gujarat, Maharashtra and Tamil Nadu. The raw materials for the chappals, known as EVA compound, are chargeable at 18 percent duty whereas chappals are chargeable at 5 percent. The law allows manufacturers to claim a refund of the inverted duty structure, in cash.

A parallel investigation in Uttarakhand was found to be connected, and the GST investigators acted to prevent refund claims of 27.5 crores. Through meticulous cyber-planning, fraudsters had created over 600 crores of ‘fake credit’, which they would have continued to encash had the racket not been busted.

IGST fraud case

Another major case was that of an IGST fraud from Surat in which preliminary investigations revealed that 19 firms had fraudulently claimed Input Tax Credit of 55 crores against fake invoices received by these firms valued at 679 crores. In this case, searches of premises of two firms Satyam Impex and Aatif Fashion revealed that 17 firms were registered with GST by misusing the identity/documents of daily wagers, casual workers, and others.

Data analytics showed that the 19 firms had issued invoices of 461 crore involving IGST of 39 crores for exports and invoices valued at 196 crores involving GST of  12 crores for domestic supplies. Perpetrators of this fraud confessed to getting fake invoices from fake firms without receipt of goods and availing fraudulent ITC to claim IGST refunds.

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