CGST Officials Busted Racket of Fake GST ITC of Rs.31.85 Crore; 2 Person Arrested

On February 23, 2022, two people were arrested by the Central Goods and Services Tax (CGST) Commissionerate in Faridabad, Panchkula CGST Zone, for running a fake billing racket involving five (5) dummy firms dealing in iron scrap trading, registered in Faridabad, Haryana, for issuance of fake invoices totaling over Rs 200 crore without actual supply of goods and availing and passing fraudulent Input Tax Credit (ITC) totaling Rs.31.85 crore.

On February 22, 2022, a team of Anti-Evasion officers from the CGST Commissionerate in Faridabad conducted simultaneous searches at five locations in Faridabad. During the inquiry, it was discovered that the aforementioned companies were obtaining and passing on fraudulent Input Tax Credits based on spurious / phoney invoices that did not represent actual goods delivery.

If the sum exceeds Rs. 5 crore, Section 132 of the CGST Act 2017 makes issuing of an invoice or bill without delivery of goods or services, as well as unlawful availment or usage of Input Tax Credit, a cognizable and non-bailable offence.

During the initial investigation, both proprietors of the aforementioned enterprises agreed that they had obtained and passed on a false ITC of Rs. 31.85 crore without actually supplying products to interstate recipients, and that they had accepted the total GST obligation of Rs. 31.85 crore. The amount could rise in the future.

As a result, both accused have been arrested under Section 69 of the Central Goods and Services Tax Act, 2017 for violating Sections 132(1)(b), 132(1)(c), and 132(5) of the CGST Act, 2017. They appeared before the CJM Court in Faridabad on February 23, 2022, and were remanded in judicial custody for 14 days.

The case is currently being investigated further.