The Tax Research Unit of the Haryana Excise and Taxation Department has detected Rs 1,182 crore fraud allegedly committed by registering 69 fake and non-existing firms in the state. Officials suspect that these entities were formed to make false claims of credit.
According to the officials, such traders don’t pay the taxes but claim credit by way of fake invoicing. The illegal credit is passed on to other business entities which use it to discharge their tax liabilities.
“These firms even issue fake bills, so that the traders can show these to the officials if needed. The invoicing is done without actually making supplies. The recipients of these invoices reduce their tax liabilities by using false credit and they cause loss to the government exchequer to the extent of false credit uses. In this manner, they don’t pay the taxes when they sell these items in retail from their shops causing huge losses to the state government and central government,” a senior officer told The Indian Express.
The officer said that most of the fake firms were registered in Gurgaon, Faridabad, Rohtak and Sonipat, adding that these firms even have shown sales of different items to the traders of Punjab, Uttar Pradesh and Uttarakhand too apart from Haryana. However, the officer said, “When our teams reached their addresses which were mentioned in the record, nothing was found there. However, in documents, these firms had shown the business of multi thousand crore rupees.”
Suspecting functioning of several firms, initially, the Tax Research Unit had zeroed on 138 newly registered taxpayers under GST for their suspicious transactions, while 69 of them were found fake or non-existent after verification.
“These fake firms have already caused a loss of Rs 1182.23 crore which needs to be recovered from the traders who were beneficiaries of the fraud. We have already recovered Rs 28.54 lakh from the traders who were found guilty in this process apart from preventing a further fraud of Rs 31.63 crore by intervening on time,” added the officer who did not wish to be quoted.
Now, these cases of the fraud have been referred to the districts concerned for follow-up action while the Tax Research Unit will closely monitor the progress of these cases at regular intervals. “We will dig out the beneficiaries who evaded tax liabilities because of these fake firms. FIRs will be lodged in almost all of the 69 cases,” added the officer.
Last year in February, the Haryana Assembly was informed that the state government has handed over as many as 45 FIRs to the State Crime Branch for thorough investigation in connection with the fraud in GST (Goods and Services Tax). Out of the 45 FIRs lodged against bogus dealers, as many as 17 FIRs pertained to dealers dealing in cotton business. In 2019, teams of the Director General of GST Intelligence (DGGI) office had also made one arrest in connection with tax evasion in cotton sell-purchase when an activist Ram Kumar had alleged Rs 300 crores GST evasion on cotton in Haryana. The arrested person was a partner of a Hisar firm and controller of the firm in Ahmedabad. “Both of the said firms had taken ITC (input tax credit) fraudulently to the tune of more than Rs 16 crore…during the investigations conducted so far into the fake billing racket in the cotton industry, the DGGI headquarters has recovered an amount of Rs 28 crore towards the GST evaded,” the DGGI had stated then.
Ram Kumar told The Indian Express on Wednesday that raids were conducted in Sirsa, Dabwali and Fatehabad in connection with the same case last week too, adding that a recovery of Rs 40 crore have been made into the matter till now. “Bogus bills are used to purchase a large quantity of cotton, steel and sugar,” said Kumar, a former scientist of Haryana Agricultural University (HAU).
“Implementation of the GST is one of the biggest tax reforms of the country leading towards ‘one nation, one tax, one market’. It provides a facility to all the firms/ dealers to claim input tax credit (ITC) throughout the country by way of filing online returns. Some unscrupulous elements try to take benefit of this facility to gain illegitimate benefit of tax by registering fake firms in different parts of the country and issuing bogus invoices from one firm to another without actual supply of goods,” then Haryana Finance Minister Captain Abhimanyu had told the Assembly.