Chartered Accountant Busted in 266 Cr GST Scam: 48 Cr Fake ITC via Bogus Invoices

The Directorate General of GST Intelligence, Bengaluru Zonal Unit, carried out an operation in more than six locations in Delhi and revealed bogus invoices worth more than Rs. 266 crore, involving fraudulently claiming and passing on fake Input Tax Credit (ITC) worth Rs. 48 crore using bogus or non-existent companies. The operation was performed as part of a follow-up action in a case that started in Bengaluru.

The key mastermind behind the scam created shell companies that did not do any real business. They carried out circular trading (buying and selling among their own companies) just to display higher turnover. They even got one of these fake companies listed on the stock exchange and committed ITC fraud. The investigation found that four of these companies, despite having no real business, claimed to receive goods and services worth hundreds of crores.

The investigation uncovered that the main mastermind in the case was one of the chartered accountants/statutory auditors, who used to handle the transactions of these shell companies. Further investigation showed that the way these companies were set up and how their shares were owned kept changing. It was also found that the Chartered Accountant (CA), who was supposed to audit these companies, had actually worked as a director in some of these fake companies earlier. This clearly proved his link to how these six shell companies were created. During searches at these companies’ offices, original documents like fake invoices and company seals were found at the place of the main person behind the scam. The main mastermind has now been arrested.

The DGGI Bengaluru Zonal Unit is carrying out a deep investigation into this fraud; this may negatively affect honest investors who put their money into these stock market-listed companies without knowing about the fraud.

After finding this type of GST fraud involving circular trading and fake ITC by listed companies, DGGI recently gave specific information to SEBI so that action can be taken under the SEBI Act.