CGST Officials unearths Fake ITC of more than Rs.100 Crore

Mumbai Central GST Commissionerate of Mumbai Zone has unearthed a fake supply and fraudulent availment of Input Tax Credit network which has availed Fake ITC of more than Rs 100 Crore.

By issuing Fake invoices totaling Rs 585 crore, more than 20 false organisations have been exploited to avoid paying GST. Today, July 15, 2022, two people who were conducting the fictitious ITC scheme of availment and usage were taken into custody.

The owner’s companies, M/s Citichem India Ltd., HM Megabrand Pvt. Ltd., H. M. Enterprises, and M/s General Chemical Industries, which deal in goods like clothing, trunks, oil, etc., were engaging in GST avoidance by utilising Fake ITC and claiming them on the basis of fraudulent invoices.

The Mumbai Central Commissionerate’s Anti Evasion officer launched an investigation based on intelligence derived from extensive data mining and analysis by the Central Intelligence section of the Principal Chief Commissioner Mumbai Zone. The investigation showed that the aforementioned enterprises were run by the owner of roughly five other businesses and that they had been found guilty of fraudulently obtaining and using an ITC worth Rs. 34.38 crores without any movements of goods or services. By generating fictitious bills totaling almost Rs. 216 crores in the names of nonexistent companies to commit this tax fraud, this is a flagrant breach of the CGST Act, 2017, and it is against the law.

Another individual, who had been running 14 fictitious businesses, was implicated in the fraudulent availment, use, and passage of inadmissible Input Tax Credits (ITC) of Rs. 40.46 Crores without any movements of goods or services, which is a flagrant violation of the CGST Act, 2017. Around Rs. 369 crores worth of fictitious bills were created specifically for this tax scam. The key controlling individual has acknowledged that, using invoices from the aforementioned four fictitious firms as justification, he obtained false ITC of Rs. 40.46 crores and distributed the remaining ITC of Rs. 25.92 crores to various entities.

A WhatsApp chat group between three people was analysed, and it revealed a specific plan of action where they appeared to have agreed that another kingpin would create a false invoice and transmit a false ITC to the owner of false entities without supplying any goods, who would then transfer the amount equal to the invoice value. However, he will eventually receive the funds back through layers of other accounts or in cash. The agreement between the two parties called for a 50:50 split of the profit obtained improperly. One of the people who was detained, nevertheless, was working as a manager, operator, and facilitator while collecting substantial commissions from both.

The inquiry further showed that a major member of the fictitious ITC network had already been the subject of DRI and CBI inquiries before being apprehended by the Enforcement Directorate in a hawala case involving a sum of money equal to Rs. 2300 Crore in 2018. He is, nevertheless, engaged in the business of obtaining and dispersing phoney ITCs, which defrauds the government coffers.

Today, July 15, 2022, the accused were both detained and brought before an additional chief metropolitan magistrate. He has been ordered to judicial custody for 14 days by the court. Additional inquiries into the case are also being conducted.

The operation is a component of the CGST Mumbai Zone’s attempts to root out bogus ITC networks and tax evaders who have been unfairly competing with honest taxpayers and stealing from the public coffers. As part of these measures, the CGST Mumbai Central Commissionerate has detained 16 tax evaders and discovered fraudulent ITC of Rs. 321 Crores since the end of the previous fiscal year. To find potential fraudsters, the CGST officials are employing data and network analysis techniques. During this fiscal year, the department will step up its campaign against tax cheats.