Tax Officials Uncover Massive Fake Invoice Scam in Bengaluru Scrap Trade Raids

Last updated: 30 November 2023

Introduction

In a significant crackdown, the Karnataka Commercial Taxes Department of Bengaluru South Zone has exposed an intricate Input Tax Credit (ITC) scam orchestrated by scrap dealers. The fraudsters employed a sophisticated scheme involving bogus invoices, resulting in a tax fraud amounting to Rs 64 crore against the government.

Details of the Operation

The Commercial Taxes Department, led by Commissioner C Shikha, initiated raids against 86 vendors after an extensive two-month-long investigation into the activities of iron and scrap dealers. The targeted vendors were found to have manipulated invoices for business transactions exceeding Rs 352 crore. The illicit gains were further inflated by fake ITC claims, contributing to the overall fraud.

 

Modus Operandi of the Scam

The fraudsters demonstrated a unique modus operandi to deceive the government. Exploiting suspended or cancelled GST registrations, they generated fake invoices to claim ITC refunds, thus facilitating a fraudulent financial gain. Additionally, the accused vendors stand accused of forging documents to register GST numbers for fictitious businesses, which were subsequently used to generate additional fake invoices.

Scale of the Fraud

The scam's scale becomes apparent as the vendors, through their nefarious activities, managed to siphon off Rs 64 crore through false ITC claims. The authorities suspect that this is not an isolated incident, raising concerns about the prevalence of such fraudulent practices in the commercial sector.

Previous Incidents

This recent bust follows a pattern of fraudulent transactions in the region. In August of this year, authorities had arrested two individuals involved in transactions worth Rs 525 crore, causing a significant revenue loss of Rs 90 crore to the government. The accused ran a syndicate that assisted human resource companies in claiming ITC based on fabricated transactions and purchase orders.

Government Response and Legal Actions

The Karnataka Commercial Taxes Department has vowed to take stringent legal actions against the perpetrators of this ITC scam. Commissioner C Shikha emphasized the need for enhanced vigilance to curb such fraudulent activities and protect the government's revenue.

Conclusion

The revelation of a widespread ITC scam in Karnataka underscores the challenges faced by tax authorities in combating increasingly sophisticated methods of financial fraud. As investigations continue, it is crucial for regulatory bodies to tighten controls and employ advanced technologies to safeguard against such scams, ensuring the integrity of the taxation system and protecting government revenues.



views  2424