Meerut CGST Commissionerate busts syndicate that fraudulently claimed ITC of over Rs. 1,000 crore via 232 fake firms

The Anti-Evasion branch of Central Goods and Services Tax (CGST) Commissionerate, Meerut, started an investigation in October 2023 into a large syndicate that fraudulently claimed Input Tax Credit (ITC) by way of fake billing.

The investigation conducted so far has revealed that the total number of 232 fake firms, with 91 firms registered on a single mobile number, are registered at various places across the country and have passed inadmissible ITC of around Rs. 1,048 crore. The total value of goods shown to be supplied through these firms is around Rs. 5,842 crore.

The CGST Commissionerate conducted a further in-depth investigation using analytical technologies such as the E-way Comprehensive Portal, Advait, and Business Intelligence and Fraud Analytics (BIFA).

Further research revealed that Mr. Praveen Kumar, the brains behind these 232 fake entities, was filing GST returns for all of them. Aside from the common mobile number used to construct and manage 91 organizations, Mr. Parveen Kumar’s possessions included ten more mobile phones and three laptop computers.

During the investigation, it was discovered that ‘Full Fledged Money Changer Companies’ (FFMCs) were utilized to park/route monies earned by fraudulently transferred ITC. Further inquiry found that two of these FFMCs made bulk purchases from other FFMCs totaling around Rs. 1,120 crore. However, no evidence of further disposal/receipt of said foreign funds was discovered during searches. The owners/directors of these two FFMCs were also unable to furnish any records or specifics regarding the ultimate beneficiary of the foreign currency.

None of the firms that issued invoices were verified to exist. However, two beneficiary firms who had received ITC on the basis of fraudulent invoices were present. Further investigations into these beneficiary firms found that in order to legitimize the bogus transactions as legitimate, they paid into two accounts belonging to two forex companies that only sold and bought foreign currency and did not deal in the supply of goods/services.

However, other recipients of fake ITC have transferred money to these accounts, claiming to explain their fraudulent purchase. The accounts used to conduct these fraudulent transactions were provisionally attached under Section 83 of the CGST Act, 2017.

The syndicate used five bank accounts to park its proceeds, which have been provisionally attached. So far, three people have been arrested for being perpetrators and conspirators in the formation of fake firms, the preparation of fake invoices without the supply of any underlying goods or services, the passing on of fraudulent ITC to various beneficiaries, and the retention of benefits derived from GST evasion proceeds.

Further investigation is underway.