Introduction: In a significant development, the Anti-Evasion branch of Central Goods and Services Tax (CGST) Commissionerate, Meerut, has successfully uncovered a large syndicate involved in a major Input Tax Credit (ITC) fraud. The investigation, initiated in October 2023, revealed a network of 232 fake firms responsible for fraudulently claiming ITC exceeding Rs. 1,000 crore.
Detailed Analysis:
1. Investigation Overview:
- The Anti-Evasion branch of CGST Meerut started the investigation in October 2023.
- Focus on a syndicate fraudulently claiming Input Tax Credit through fake billing practices.
2. Scope of the Syndicate:
- 232 fake firms identified across the country.
- One mobile number associated with 91 registered firms.
- Inadmissible ITC claimed amounts to approximately Rs. 1,048 crore.
- Falsely reported goods’ value stands at around Rs. 5,842 crore.
3. Operational Details:
- Praveen Kumar identified as the mastermind managing the GST returns for the fake firms.
- 10 additional mobile phones and 03 laptops seized from Mr. Praveen Kumar.
- Analytical tools such as E-way Comprehensive Portal and Business Intelligence employed for deeper investigation.
4. Money Changer Involvement:
- Full Fledged Money Changer Companies (FFMCs) utilized for fund routing.
- Bulk purchases of approximately Rs. 1,120 crore from two FFMCs.
- Lack of records regarding further disposal/receipt of the foreign currency.
5. Inexistent Invoice Issuers:
- None of the firms issuing invoices found to be in existence.
- Two beneficiary firms availed ITC on fake invoices but were existent.
6. Money Transfer Scheme:
- Beneficiary firms justified fake purchases by making payments to forex companies dealing only in the sale/purchase of foreign currency.
- Five bank accounts used for syndicate proceeds provisionally attached.
7. Arrests and Attachments:
- Three individuals arrested for involvement in creating fake firms and preparing fake invoices.
- Provisional attachment of five bank accounts and accounts involved in fake transactions under Section 83 of the CGST Act, 2017.
Conclusion: The Meerut CGST Commissionerate’s successful crackdown on a syndicate orchestrating a massive Input Tax Credit fraud showcases the government’s commitment to combating financial malpractices. The exposure of 232 fake firms, a mastermind behind the operation, and the involvement of Full Fledged Money Changer Companies sheds light on the complexity of such fraudulent schemes. The arrests and provisional attachments signal a proactive approach to curb such activities and ensure accountability. The ongoing investigation is crucial to unraveling the full extent of the syndicate’s activities and bringing all perpetrators to justice.
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Ministry of Finance
Meerut CGST Commissionerate busts syndicate that fraudulently claimed Input Tax Credit of over Rs. 1,000 crore through a network of 232 fake firms, 3 arrested
The Anti-Evasion branch of Central Goods and Services Tax (CGST) Commissionerate, Meerut, started an investigation in October 2023 into a large syndicate that fraudulently claimed Input Tax Credit (ITC) by way of fake billing.
The investigation conducted so far has revealed that total number of 232 fake firms, with 91 firms registered on a single mobile number, are registered at various places across the country and have passed inadmissible ITC of around Rs. 1,048 crore. Total value of goods shown to be supplied through these firms is around Rs. 5,842 crore.
Through the use of various analytical tools such as E-way Comprehensive Portal, Advait and Business Intelligence and Fraud Analytics (BIFA), the CGST Commissionerate carried out deeper investigation.
On further investigation, it was revealed that these 232 bogus firms were operated by mastermind Mr. Praveen Kumar, who was filing the GST returns for all the fake firms. Apart from the common mobile number which was used to create and manage 91 firms, 10 more mobile phones and 03 laptops were impounded from the possession of Mr. Parveen Kumar
During the course of investigation, it came to light that ‘Full Fledged Money Changer Companies’ (FFMCs) were used for parking/routing of funds generated through fraudulently passed on ITC. Further investigation revealed bulk purchases of around Rs. 1,120 crore from two of such FFMCs from other FFMCs. However, no record of further disposal/receipt of said foreign currency has been recovered during searches. Owners/ Directors of these two FFMCs, too could not produce any record or details of ultimate recipient of the foreign currency.
None of the firms that issued invoices were found in existence. However, two beneficiary firms that had availed ITC on strength of fake invoices, were existent. Further investigation into these beneficiary firms revealed that in order to justify the fake purchases as genuine purchase, they made payment to two accounts belonging to two forex companies engaged in sale and purchase of foreign currency only and did not deal in supply of goods/services. However, various beneficiaries of fake ITC have transferred money to these accounts purportedly to justify their fake purchase. The accounts being used to carry out these fake transactions were provisionally attached under Section 83 of the CGST Act, 2017.
Five bank accounts that were used to park the proceeds by the syndicate have been provisionally attached. Three persons have been arrested so far for being perpetrator and conspirator in creation of fake firms/ preparation of fake invoices without supply of any underlying goods/services/ passing on of fraudulent ITC to various beneficiaries/ retaining of benefit arising out of the proceeds of GST evasion.
Further investigation is underway.
