GST Fraud worth Hundreds of Crores by 150 entities via 30 Fake Firms in Madhya Pradesh

In about a dozen districts of Madhya Pradesh, at least 30 fake firms and over 150 entities have been identified to be involved in Goods and Services Tax (GST) fraud using fraudulent invoices (bills) worth hundreds of crores.

Teams from the Director General of GST Intelligence (DGGI)’s Bhopal zonal office are undertaking search and seizure operations in the districts to determine the scope and connections of the massive fraud.

The DGGI is involved in collection, collation and dissemination of intelligence relating to evasion of Central Excise Duty, Service Tax and GST across India, as well as uncovering evasion methods.

The raids are being carried out in areas such as Bhopal, Indore, Ujjain, Jabalpur, Rewa and Sidhi, Shahdol, Katni, Sagar, Khandwa, and Khargone, according to reports. DGGI personnel from the different states are also conducting similar operations in other areas of the nation, they added. Surjit Bhujbal, principal director general, DGGI, New Delhi, oversees national activities.

The search and seizure operations in Madhya Pradesh began three days ago, following information from the Noida (Uttar Pradesh) police, who busted a gang operating a GST fraud network worth over Rs 10,000 crores across India on May 1 and arrested eight people from Delhi, Mumbai, and various districts of Uttar Pradesh.

This gang was divided into two teams, one of which was responsible for generating as much as 2660 phoney businesses with GST numbers using stolen identities (Aadhar card, PAN card), registering them in various states, and selling them to another team for exorbitant fees (average Rs 80,000-90,000 per firm).

The second team then utilised fraudulent invoices (bills) generated in the name of these phoney enterprises to claim GST input tax credits (refund of GST) without any real supply/transport of goods or services, resulting in revenue losses to the government of thousands of crores.

According to the preliminary investigation by the Noida police, each fictitious business generated fake bills of Rs 2-3 crores every month. The Noida police are now looking for seven people who brought information on the fraudulent firms set up by the team of eight detained people.

Sources told, over 150 corporate organisations in Madhya Pradesh exploited 30 of these bogus businesses to commit fraud. As of yet, around Rs 2 crores in cash and other damning papers have been confiscated as part of the investigations, and investigators have discovered proof of GST fraud amounting to hundreds of crores. According to insiders, the true scope of the scam will be discovered only when the procedures are completed. The search and seizure activities, which involve over 50 DGGI employees, are expected to last at least another week.

The team discovered various violations, including the criminals’ registration of three phoney businesses at the same address using forged rent agreements. According to authorities, in one example in Sagar district, the phoney rent agreement utilised the name of an owner who died three years ago.

The DGGI team has not released the identities of those implicated since deeper linkages in the scam are being investigated. Because organisations in the coal supply chain in Rewa, Katni, Shahdol, and Sidhi districts were discovered to be implicated in the fraud, the repercussions of the crime might be severe, and there could be linkages to the Chhattisgarh coal tax scandal, according to sources.

Meanwhile, in a separate instance, the DGGI Bhopal office team detained a person who was also involved in GST fraud using a false invoice in the early hours of May 23. This accused person ran a bogus firm as a subcontractor to another subcontractor of a company that receives state government contracts for road and water resource projects. According to sources, his interrogation is anticipated to reveal linkages to the true beneficiaries of the crime, i.e. the individuals who utilised the dummy corporation to perpetrate the genuine GST fraud (using bogus bills to claim input tax credit).