DIRECTORATE GENERAL OF GOODS & SERVICES TAX INTELLIGENCE, ZONAL UNIT, AHMEDABAD.
6th & 7th Floor, I-The Address, Near Sola Fly Over, Off : SG Highway, Ahmedabad –
380060 Phone: 079-26477011; Fax: 079-29600116.
F. No. DGGI/AZU/Gr ‘A’/12(4)/118/2019-20
Acting on specific intelligence that a few units located in Kandla SEZ at Gandhidham, (Gujarat) in connivance with about 20 exporter firms/companies based in the National Capital Region (NCR) have hatched a major conspiracy to defraud the Government exchequer, the Directorate General of GST Intelligence (DGGI), Ahmedabad Zone (an Investigative arm of the Central Government), has initiated investigations by conducting searches in three units located in SEZ and thereafter at the premises of NCR based exporters and their godowns.
The modus operandi detected indicates huge overvaluation to the extent of 3000% of the market value of goods exported to the SEZ (zero rated supply) and claiming of refund of Input Tax Credit (ITC) obtained by fraudulent means. Evidences confirm that the source of ITC claimed as refund against exports itself is fraudulent.
In what seems to be a meticulously planned conspiracy, the commodity selected by the entities for the fraudulent act has been found to be sin goods viz “manufactured tobacco and other related products” falling under CTH 2403 which is subject to tax at the rate of 93% and 188%, including Cess. Due to high incidence of taxes on such goods the scope to claim refunds of ITC against refunds is manifold more than the goods which are subject to tax at lower rate of 28% or 18%. Thus, the conspirators have aimed at deriving maximum illegal gain out of fraudulent transactions. It is noteworthy to mention that tobacco products are mostly Business to Consumer (B2C) supply items and it is relatively easier to obtain from the market GST paid invoices without corresponding goods, as the goods often get sold in the market without corresponding bills.
It has been revealed that low grade material like scented jarda, kimam (tobacco extract), filter khaini etc. which have been manufactured clandestinely without payment of tax by a few Noida based units or procured from the local market at the rate of Rs. 150 to 350 per kg have been exported to the SEZ based units at the rate of Rs. 5000 to 9000 per kg and subsequently, refund of accumulated ITC, sourced fraudulently, in excess of Rs. 400 crores has been claimed by the exporters from the jurisdictional GST authorities.