DGGI Officials Busts GST Fake ITC Racket worth Rs.160 Crore; One Person Arrested

The Directorate General of GST Intelligence (DGGI) Gurugram Zonal Unit (GZU), Haryana, has identified a case in which a network of nonexistent & phoney firms collaborated with several existing organisations / merchants / wholesalers to utilise and pass on total ITC of more than Rs.160 crore.

Based on intelligence analysed and acted upon by the Gurugram Zonal Unit, it was discovered that a merchant, who is an importer and wholesale trader of dry fruits, claimed IGST Input Tax Credit on imports, but then issued duty-paid invoices to various non-existent firms, while the goods (dry fruits) were sold in the open market to various retailers. A number of the enterprises to which invoices were issued were discovered to be non-existent / fictitious (registered on the GST site under a different HSN), who then generated goodless invoices in order to fraudulently pass on ITC without the provision of any products.

The merchant has rendered itself responsible under Section 122 (i) (ii) of the CGST Act, 2017, etc., as a result of which the merchant has deposited Rs.5 crore to date, with additional recovery likely in this issue.

In total, ten such fraudulent organisations have fraudulently obtained and passed on Input Tax Credit (ITC) in excess of Rs. 160 crore, based on inflows from the merchant and other fake/cancelled sources, which is being investigated further. Sh. Pawan Kumar Sharma was identified as the controller of one such firm to whom duty-paid invoices were submitted without provision of genuine items by the merchant, resulting in fraudulent ITC of Rs. 26.3 crore. Investigation revealed that Sh. Pawan Kumar Sharma is also the owner of another company, M/s Pawan Traders, which is also implicated in the fraudulent transfer of Input Tax Credit (ITC).

As a result, Shri Pawan Kumar Sharma was detained on 13.05.2022 under the provisions of Section 69 of the CGST Act, 2017, read with clause (b) (c) of paragraph (1) of Section 132 of the CGST Act, 2017, and produced before the CMM, Patiala House Court, who imposed judicial custody for 14 days.

Further inquiry into the problem is underway.