Mumbai GST Department Exposes Massive Rs 150 Crore Scam Involving Shell Companies

Posted on    27 September 2023

A significant scam occurred involving the State Goods and Services Tax (GST) department in Mumbai, India.


Here's a summary of the key points from the report

  1. Scam Unearthed: The state GST department's vigilance wing has uncovered a scam worth Rs 150 crore (approximately $20 million USD) involving 17 traders and two tax officers based in Mumbai.
  2. Shell Companies and Fake Directors: The alleged masterminds of the scam created around 40 shell companies. These companies had directors who were actually contractual workers, porters, hotel waiters, and drivers, suggesting that their identities were forged for the purpose of the scam.
  3. Suspensions and Involvement of Officials: One of the tax officials involved in the scam was suspended a few months ago, and there are indications that several other top officials might also be involved. The department has not yet registered an FIR (First Information Report) in the matter.
  4. Detection and Investigation: The fraud was initially detected in 2022, leading to a detailed investigation by the vigilance wing. The investigation found that 16 traders from Ghatkopar and one from Kurla had received non-refundable returns of over Rs 150 crore through fraudulent means.
  5. Fake Addresses: The traders had registration certificates with only three addresses in Ghatkopar, all of which were rented shops with small areas. The shop owners' identities were fictitious, and documents were forged.
  6. Refund Applications: The 17 traders registered under GST had submitted 40 refund applications for the financial year 2021-2022, citing the categories of 'Exports of goods without payment of tax' and 'Inverted tax structures.'
  7. Involvement of Tax Officers: The investigation revealed that state tax officer Amit Lalge processed the refund applications made by the Ghatkopar-based traders, and officer Gajanan Lad processed an application from the Kurla-based trader. Lalge was suspended in May 2022, and Lad was suspended in June of the same year.
  8. Recovery Process: The GST department is currently assessing the actual refund value based on available documents and has issued show-cause notices to all the traders involved. Once the reassessment is complete, the process of recovering the fraudulent amount will begin.
  9. Allegations and Hush-up Attempts: Amit Lalge allegedly confessed during the internal investigation to accepting kickbacks from traders, although the nature of these dealings remains unclear. He also hinted at the involvement of senior officials in the matter, which may have led to attempts to cover up the issue.
  10. Departmental Inquiry: According to Departmental Inquiry Rules, if a government official is found responsible for revenue loss, they should face criminal action, and an FIR should be registered against them. However, in this case, no FIR has been filed against the involved officers.

This situation highlights a significant case of corruption and fraud within the GST department in Mumbai, with allegations of involvement by multiple officials. The delay in taking legal action and registering FIRs has raised concerns about the handling of the case. Further investigation and action by authorities will be necessary to address this issue and hold those responsible accountable.

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