GST Fraud of over 1000 Cr discovered in Telangana

The Commercial Taxes Department has discovered over Rs.1,000 crore in GST fraud in refunds and input credit tax (ITC) cases after the Congress party took power in Telangana. And this could only be the beginning, according to official sources on Monday.

Preliminary desk audits by senior CT officials have revealed fraudulent refunds and input tax credits, which appear to have been deliberately suppressed by the previous regime. However, with Chief Minister A. Revanth Reddy giving tax-generating departments a free hand to find ways and means to increase tax revenues, CT officials have been going through the cases with a fine tooth comb.

At least a dozen enterprises are claimed to be under investigation for fraudulent refund cases, with another 51 instances in various levels of investigation in various divisions in the twin cities and across the state connected to the fake ITC.

The total turnover shown by the 52 cases under investigation is estimated to be Rs.5,893 crore, with a tax of Rs.976 crore. Overall, officials have discovered fraud of Rs.1,000 crore, with the possibility of much more as the probe continues, they said, requesting anonymity.

They cited concrete examples, claiming that a few corporations had been filing monthly returns in the form of GSTR-1 stating taxable interstate transactions and passing on the ITC to taxpayers in other states.

What surprised the officials was that enterprises were filing fraudulent consolidated reports in form GSTR 3B showing both local and inter-state sales with zero turnovers and not paying any tax reported on the initial GSTR-1 return. It was also discovered that a few other enterprises, without paying taxes, were irregularly transferring the ITC to other taxpayers, resulting in a significant loss to the government.

According to government sources, the enterprises under investigation have not paid the tax due to them and have allowed their clients to claim irregular input credit, reducing the tax payable by them, resulting in a dual loss of income.

Role of IIT Hyderabad

Despite this, officials were surprised to learn that the Indian Institute of Technology, Hyderabad (IIT-H), which has an agreement with the department to provide IT support and has access to all of the data, did not report the systematic fraud of tax evasion or any deviations in its monthly report.

When they probed deeper, they discovered concealed fields of data regarding taxpayers. When confronted, the IIT-H officer in charge is said to have admitted to “oral instructions” from high bureaucrats in the previous government to conceal critical data entry!

Adding to the intrigue, all five programmers were using the same system administrator login to make coding modifications, and no security audits had been performed on the modules thus far. The department discovered massive tax evasion, and IIT-H’s work is also being investigated. According to reports, the director has been made aware of IIT-H’s role, and a specific forensic assessment of the institute’s applications/modules has been conducted.

When contacted, Commissioner of Commercial Tax T.K.Sridevi stated that a thorough investigation into the fraud is underway.