Punjab State Taxation Dept Unearths Massive ITC Fraud; 12 FIRs Registered and Over Rs 20 Crore Recovered

A massive Goods and Services Tax (GST) fraud has been recently exposed by the state taxation department in Punjab. The fraud involved fake input tax credit (ITC) transactions. In connection with the fraud, 12 FIRs have been registered, and police have recovered over Rs 20 crore.

In the present fraud, the accused illicitly claimed fraudulent tax deductions on GST using bogus invoices. The racket was unearthed through a data-driven verification exercise comparing purchase details reflected in GSTR-2A/2B returns with corresponding e-way bill records, as per Randhir Kaur, Deputy Commissioner of State Tax (DCST) Ludhiana Division.

When examined, large-scale mismatches were observed, reflecting the use of fraudulent transactions and misuse of GST registrations. As per the tax department, the GST registrations in question were granted by the Government of India under its ‘Ease of Doing Business’ initiative, which was allegedly obtained by the accused. Thereafter, they were misused to form fake ITC chains and dupe the state exchequer.

When a detailed investigation was conducted in the case, the officials noted that the fake tax invoices were issued using several shell companies without the movement of any goods or services in reality. Thereafter, these fake invoices were used to avail illegal input tax credit (ITC). This fraud has caused massive loss to the Indian government’s revenue and has also significantly affected genuine businesses in the supply chain.

Further probe exposed that multiple GST registrations were obtained with the help of fake documents. In several cases, the individual who was showing himself/herself as the owner of the company denied having any link with the company. They asserted that they neither requested nor consented to their identities being utilised for GST registration. Further, the mobile numbers concerning these GST registrations were connected with bogus Aadhaar-based identities, and also the bank accounts filed for obtaining the GST registration were either found to be unverified or failed validation checks.

Officials had noted a pattern that several entities had shown inward supplies in their GST returns; however, when their returns were checked, they found corresponding e-way bills for the movement of goods either missing or with key mismatches. This resulted in a thorough investigation of these entities.

In conclusion to the aforementioned findings, the GST authorities decided to begin criminal proceedings against the individuals and firms linked to this fraud. About 12 FIRs have been registered yet in the present ITC fraud under sections 318 (2), 319 (2), 338, 336 (3), and 340 (2) under the Bhartiya Nyaya Sanhita (BNS) in the Ludhiana division.