The malpractice of fake invoices generation and the consequent circular trading seems to be widely entrenched in the business world more or less like Covid-19. In Covid-19 the effective and voluminous tests are identifying greater number of people infected, similarly in GST as the raids by DGGI have been intensified, more and more fake invoice and false ITC availment frauds are being unearthed. Surprisingly these frauds are being committed by the miscreants with unprecedented impunity since long.
Now the DGGI (DGGI) has succeeded for the first time in laying hands on a Chennai-based woman mastermind, running the racket of fake invoices to fraudulently claim input tax credit on the seventh day of its nationwide drive against the goods and services tax (GST) frauds.
The Chennai zonal unit of DGGI arrested the women as she was running a web of seven fake companies created and operated by herself in the names of her family members, including her recently deceased mother-in-law, relatives and friends.
A case was booked against her firm for availing and passing on fraudulent input tax credit (ITC) of Rs 14.87 crore on the companies’ fake invoices.
During the search operation at her eight premises in Chennai her modus operandi was a bit unusual. It was unearthed that the identity documents had been procured by her from relatives and friends for a payment of petty monthly sum.
Besides her, the DGGI arrested five more persons including a chartered accountant in the latest drive, taking the total tally of GST fraudsters’ arrested so far to 36, which included three chartered accountants. The special drive, launched on November 9, 2020, led to 519 cases against 1,736 identified entities.
The GST investigating authority on 20th November arrested two persons in the National Capital Region (NCR), two in Hyderabad, one in Chennai and one in Ahmedabad. Searches and surveys were conducted in 19 cities -- Chennai, Ahmedabad, Nagpur, Visakhapatnam, Siliguri, Patna, Bhopal, Surat, Hyderabad, Nagpur, Raipur, Bhubaneshwar, Jaipur, Ghaziabad, Ludhiana, Delhi, Bengaluru, Mumbai and Kolkata.
The government has already initiated the tightening of the procedure for new GST registration to check frauds. The businesses whose owners or promoters do not have commensurate income-tax payment records will require physical and financial verification before their companies can be given GST registration.
Fake invoices were not only issued for availing ITC fraudulently, but also used as conduit for nefarious activities leading to tax evasion, massive bank loan fraud, money laundering and hawala transactions. These activities have been largely carried out by non-existent or fly-by-night firms and by using a network of firms to misuse the system to usurp ITC on commission basis.