GST Evasion: ED Conducts Multi-State Searches in Rs 658 Crore GST ITC Fraud Case

The Enforcement Directorate on Tuesday carried out searches in several states as part of an investigation connected to a large GST tax credit fraud amounting to Rs 658 crore. The case started in Arunachal Pradesh, but it spread across Jharkhand, West Bengal, and Manipur. The investigation is being done under the Prevention of Money Laundering Act (PMLA), with help from local police forces in different states.

As per officials, the searches were conducted at the homes and offices of the people and companies involved in this fraud.

The Itanagar police filed an FIR alleging that two individuals, Rakesh Sharma and Ashutosh Kumar Jha, used bogus invoices to illegally claim GST ITC. These invoices showed business transactions that never actually happened.

The GST Input Tax Credit (ITC) allows the business to reduce its output tax burden. When a business pays GST on its purchases, it can adjust this GST against its output tax, which is payable to the government. This mechanism was introduced to avoid double taxation or the cascading effect. However, many fraudsters misuse this mechanism for illegal benefits by claiming ITC using bogus invoices.

In the present case, a fake non-existent firm called Siddhi Vinayak Trade Merchants was alleged to have claimed ITC of Rs 99.31 crore. Over 58 fake companies across the country were allegedly used to carry out the fraud.

The search operation is being conducted by the ED’s Itanagar office in coordination with the police departments from other states to uncover the entire network in this fraud.