GST fraud: migrant running roadside kiosk in Ernakulam asked to pay ₹66 lakh with fine

Bidyut Sekh, who has been running a roadside kiosk near the private bus stand in Perumbavoor for nearly a decade, is in a state of shock ever since his mother back in his home at Murshidabad in West Bengal forwarded a notice.

The notice from the office of the Deputy Commissioner of Central GST and Central Excise, Coimbatore Division, demanded him to pay ₹66.22 lakh with 25% penalty within 30 days for having fraudulently availed of Input Tax Credit (ITC) for the said amount between February and July 2019. The document says that he had taken GST registration as a plywood supplier by the trade name M/s Tam Associates in Coimbatore, which now stands cancelled.

“I have no clue what this is all about. In fact, I have nothing to do with plywood and has never been to Tamil Nadu in my life. I am planning to register a police case,” said Mr. Sekh.

But it seems he may be in far deeper trouble than he already is. For, it has emerged that someone has fraudulently secured GST registrations using his PAN card in four more States – Andhra Pradesh, Chhattisgarh, Maharashtra, and Karnataka – for obtaining fake ITC. “The person may end up getting similar notices asking to pay such exorbitant amount towards fraudulently availing ITC from tax authorities in these States as well. All he can do is to register a police complaint as the tax authorities can do little other than send him notice as they at their disposal have only his address,” said a State commercial tax official.

The fraud came to light after the tax officials in Chhattisgarh alerted their counterparts in Tamil Nadu that six non-existent fictitious units registered in Chhattisgarh had passed on inadmissible ITC to various entities registered all over India. The unit registered in the name of Mr. Sekh was apparently one of them.

During preliminary investigation, it was noticed that the unit had declared a turnover of ₹3.68 crore and their tax liability on outward supplies as ₹66.25 lakh for the period between February and July, 2019, in their GST returns. However, no e-way bills were raised for outward supply in the e-way bill portal despite the supplies being inter-State.

“This is apparently a common fraud by the name ‘circular trade’ between fictitious entities. The liberalised registration under GST regime means that the registration is automatically granted within three days without proper field verification on submission of relevant documents,” said the official.

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Printable version | Sep 11, 2022 3:15:15 am | https://www.thehindu.com/news/cities/Kochi/gst-fraud-migrant-running-roadside-kiosk-in-ernakulam-asked-to-pay-66-lakh-with-fine/article65699118.ece