According to a press release of the Ministry of Finance on 7 March 2024, the Meerut CGST Commissionerate busts a syndicate that fraudulently claimed Input Tax Credit (ITC) of more than Rs. 1,000 crore through a network of 232 fake firms.
The Anti-Evasion branch of the Central Goods and Services Tax (CGST) Commissionerate in Meerut launched an investigation in October 2023 targeting a significant syndicate involved in fraudulently claiming Input Tax Credit (ITC) through fake billing practices.
The ongoing investigation by the Meerut CGST Commissionerate has uncovered a network of 232 fake firms, with a staggering 91 of these firms registered under a single mobile number. These entities are spread across various locations nationwide and have been responsible for illegitimately claiming ITC amounting to approximately Rs. 1,048 crore. The total value of goods purportedly supplied through these fake firms is estimated to be around Rs. 5,842 crore.
Utilizing sophisticated analytical tools such as the E-way Comprehensive Portal, Advait, and Business Intelligence and Fraud Analytics (BIFA), the Meerut CGST Commissionerate conducted an extensive investigation.
Further probing revealed that the mastermind behind these 232 bogus firms is Mr. Praveen Kumar, who was found to be filing GST returns for all the fraudulent entities. In addition to the central mobile number used to manage 91 firms, investigators seized 10 additional mobile phones and 3 laptops from Mr. Praveen Kumar.
The investigation by the meerut CGST commissionerate also discovered that ‘Full Fledged Money Changer Companies’ (FFMCs) were utilized for the parking and routing of funds acquired through the fraudulent passing of ITC. Records indicated bulk purchases totalling around Rs. 1,120 crore from two such FFMCs. However, no evidence of further disposal or receipt of the foreign currency was found during searches. Owners and directors of these FFMCs failed to provide any details regarding the ultimate recipients of the foreign currency.
None of the firms issuing invoices were found to be legitimate entities. However, two beneficiary firms that had availed ITC based on fake invoices were identified. A deeper examination of these beneficiary firms revealed that they made payments to two accounts belonging to forex companies solely engaged in the sale and purchase of foreign currency, with no involvement in the supply of goods or services. The investigation disclosed that various beneficiaries of fake ITC transferred money to these accounts to justify their fraudulent purchases. Consequently, the accounts associated with these deceitful transactions were provisionally attached under Section 83 of the CGST Act, 2017.
In a significant move, five bank accounts used by the syndicate to store the illicit proceeds have been provisionally attached by Meerut CGST Commissionerate. So far, three individuals have been arrested for their roles as perpetrators and conspirators in the creation of fake firms, the issuance of fake invoices without corresponding goods or services, the fraudulent passing on of ITC to multiple beneficiaries, and the retention of benefits stemming from GST evasion.
The investigation into this elaborate syndicate is ongoing as authorities work to bring all involved parties to justice.
To Access the official press release of Ministry of Finance CLICK HERE
To Access the Highlights of First-Ever National Conference of Enforcement Chiefs CLICK HERE
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