The Department of Revenue has identified as many as 931 cases of fraudulent GST (Goods and Services Tax) refund claims through data analytics and has now tasked the GST data analytics wing to scrutinise all past and pending refund claims filed all over the country for inverted duty structure, sources said.
Refund claims worth more than ₹28,000 crore are said to have been filed by over 27,000 taxpayers so far on account of inverted duty structure in the current financial year.
The sources said such identified taxpayers, who had purchased goods from tax-evading, non-filers, would face verification and scrutiny as necessary.
This is being reviewed and monitored weekly by Revenue Secretary Ajay Bhushan Pandey.
The sources said to curb input tax credit (ITC) frauds, data analytics is to be done on all refunds since 2017, keeping an eye on the modus operandi of unscrupulous refund claimants or fly-by-night or shell business entities for availing fake ITC.
GST formations have booked 6,641 cases involving 7,164 entities till November last year and have, so far, recovered about ₹1,057 crore.
The highest number of such fraud cases have been booked in the Kolkata zone, followed by Delhi, Jaipur and Panchkula (Haryana), the sources said, adding that fraud recently detected by central tax authorities in Delhi, involving GST refund for inverted duty structure, was deliberated at the second National Conference on GST last week.
Fake ITC credit
The sources also said investigators in Delhi had cracked — through data analytics — a significant fraud case wherein fraudsters created a network of over 500 entities comprising fake billing entities, intermediary dealers, distributors and bogus manufacturers of ‘hawaii’ chappals for availing and encashing fake ITC credits.
The bogus ‘manufacturers,’ created in Uttarakhand, were making supplies to other fictitious entities and retailers in Gujarat, Maharashtra and Tamil Nadu.
The raw materials for the chappals, known as EVA compound, are chargeable at 18% duty whereas chappals are chargeable at 5%, sources said, adding that as a result, the law allowed the manufacturers to claim refunds of the inverted duty structure in cash. GST investigators found an ongoing parallel investigation in Uttarakhand to be connected and took swift action in preventing refund claims of ₹27.5 crore.
Through meticulous cyber-planning, fraudsters had created over ₹600 crore of ‘fake credit’ which they would have continued to encash had it not been busted.
The main accused in this case was arrested in December and continues to be in judicial remand.
It was also through data analytics that recently, GST formations had identified a few exporters with ‘star’ status who were fraudulently availing IGST refund and were untraceable at their registered addresses.
In these cases, an exporter with over ₹50 crore of shipments of readymade garments had taken refund of ₹3.90 crore while the entity’s total GST payment in cash was a mere ₹1,650.
In another case, tax payments in cash have been made for ₹51,201 while the exporter had obtained refund of ₹9.59 crore. The GST data analytics wing had been able to identify all such cases involving fake invoicing and fraudulent tax credits, which have been encashed through the facility of IGST refunds, the sources said.