The detection of one of the biggest frauds — the generation of fake bills worth ₹1,200 crore — after the Goods and Services Tax (GST) regime was implemented last July came after a detailed investigation spread over two months into a web of fake companies.
The accused — Suhail, Mohammed Basha and Hafeezur — had obtained GST registrations for fake companies that were shown to be engaged in trading of iron and steel scrap to other companies. They exploited the loophole of the system not being able to match GSTR-1 and GSTR-3. “The system is currently unable to match the returns. This loophole is being plugged now,” a source said.
Though the companies floated were here, the input tax credit may have been used by iron and steel producers located outside the State too, said investigators, who used data analytics to zero in on them. GST officials also believe that such fraudulent transactions are being seen in plastic, aluminium, iron and steel trade.
While Baha had obtained 14 GST registrations in the names of his relatives and others, Suhail had obtained six. They floated fake companies by giving made-up addresses, which made the investigation difficult.
“It took us two months of meticulous investigation to unearth the module and arrest the three kingpins,” said G. Narayanaswamy, Commissioner (Bengaluru South) of Central Tax. “The accused, though they had 20 companies registered, were operating on a single computer to generate all the bills. They were detected using the IP address,” he said.
Their modus operandi, according to him, was creating fake addresses, issuing fake GST invoices, and generating e-way bills with fake/wrong vehicle registration details without actually supplying any goods.
“The companies were floated with the intention to fraudulently pass on input tax credit. So far, we have found generation of GST invoices worth around ₹1,200 crore that had a GST liability of about ₹200 crore. We are expecting [the amount] to go up as we investigate further. There could be more such modules,” Mr. Narayanaswamy said. He added that more than 18 iron and steel producers, who have used these bills to claim input credit, were on the department’s radar.
