The Madhya Pradesh Goods and Services Tax (GST) department has unearthed a massive fraud involving at least 30 fake firms and over 150 entities. The fraudsters have been using fake invoices worth hundreds of crores to claim input tax credit (ITC) from the government.
The fraud came to light after the GST department conducted raids on several premises in Bhopal, Indore, Gwalior, Jabalpur and other cities in the state. The raids led to the detection of fake firms that were registered with the GST network but did not exist on the ground. The fraudsters had created these fake firms using forged documents and were using them to raise fake invoices.
The search and seizure operations in Madhya Pradesh started three days ago after inputs from the Noida (Uttar Pradesh) police that on May 1 busted a gang operating the GST fraud network worth over Rs 10,000 crores across India and arrested eight persons from Delhi, Mumbai and different districts of Uttar Pradesh.
This gang operated in two teams – one was involved in forming as many as 2660 fake firms with GST numbers, created through stolen identities (Aadhar card, PAN card), registering them in different states and selling them to another team for high fees (average Rs 80,000-90,000 per firm).
The second team then used fake invoices (bills) made in the name of these fake firms to claim GST input tax credits (refund of GST) without any actual supply/transport of goods or services, thus causing revenue losses worth thousands of crores to the government.
Fake bills worth Rs 2-3 crores were generated per fake firm per month, according to the preliminary probe by the Noida police. The Noida police are now on lookout for seven persons who brought the details of the fake companies created by the team of the eight arrested persons.
The team found several offences including that the perpetrators had registered three fake firms at the same address using fake rent agreements. In one case in Sagar district, the fake rent agreement used the name of an owner who died three years ago.
No names of involved persons have been given out by the DGGI team as deeper links in the fraud are being probed. Since entities in the coal supply chain in Rewa, Katni, Shahdol and Sidhi districts have been found to be involved in the fraud, the implications of the fraud could be high and there might be links to the coal levy scam in Chhattisgarh.
Meanwhile, in an unrelated case, the DGGI Bhopal office team had in the wee hours of May 23 arrested a person who was also involved in GST fraud using fake invoice. This arrested person operated a dummy firm as a subcontractor to another sub-contractor of a firm that takes state government contracts on roads and water resources projects. His interrogation is likely to provide links to the actual beneficiaries of the fraud – meaning the persons who used the dummy firm to commit the actual GST fraud (using fake bills to claim input tax credit).