In a major crackdown on iron and steel industries in the State, the Hyderabad Central GST intelligence wing has detected that eight such companies have been generating fake invoices without actual supply of TMT bars and other products.
Since July 2017
The fake invoices generated by these companies accounted for about ₹1,289 crore and the input tax credit (ITC) of ₹224 crore.
The tax payers of these companies were passing on the ITC to other tax payers within the same group and some to other tax payers since July 2017.
Five of these tax payers are operating from the same address and many of the directors, partners and proprietors were common.
GST Hyderabad Central Principal Commissioner M. Srinivas in a press release late on Tuesday night said that several incriminating documents had been recovered during the simultaneous searches conducted at the residential and business premises of these companies.
The release said the companies were also indulging in circular fake trading just to inflate their turnover, besides supplying such fake invoices to others.
The erring companies generated e-way bills in support of the fake invoices issued by them.
While some e-way bills are also fake, the vehicles mentioned in the bills were found to have much lesser carrying capacity than the quantity shown in the invoices.
Banks defrauded
Mr. Srinivas said investigation also, prima facie, revealed that the above modus operandi was also being adopted to defraud the banks for claiming ‘ineligible’ credit facilities or Letters of Credit (LCs), without any collateral securities. One key person was arrested and a sum of ₹ 17.75 crore recovered, the release said.
Sources in the GST Hyderabad Central said that the modus operandi of these firms is to issue fake GST invoices i.e only invoices without any actual/ physical movement of goods, in this case TMT bars, to the rest of the players in this network. Interestingly most of the companies happen to be operating from the same building in the same floor in Jubilee Hills here.
By showing that they have supplied TMT bars to other players they are merely passing on the ineligible input tax credit to others who in turn are doing the same, thus indulging in circular trading.
The same firms are acting as both suppliers as well as recipients of these TMT bars, a senior officer told The Hindu .
Employees’ confession
An official said the facts came to light during the course of investigation and simultaneous search conducted on their premises and statements recorded from various people who were employed in these firms. The employees confessed that there was never any physical movement/ supply of goods and mere paper transactions were made and to cover up the fraud, these firms have resorted to fabrication of documents.
The GST official said as per Section 132(1) b of CGST Act 2017 issuance of invoices without any actual supply of goods is an offence and when the value of such tax evaded exceeds ₹5 crore (Section 132(i) of CGST Act 2017) it is a cognizable and non-bailable offence under Section 132(5) of CGST Act 2017.
