New Delhi: Misuse of beneficial provision of Input Tax Credit (ITC) under the GST regime has become the most common mode of evasion under the GST law. The regional teams of the Central Board of Direct Taxes and Customs (CBIC) have been regularly disclosing such matters since the inception of the GST regime. During the financial year 2020-21, the CGST Zone and the Directorate General of GST Intelligence (DGGI) have registered around 8,000 cases involving fake ITC of over Rs 35,000 crore. During the financial year, 426 people including CAs, lawyers and 14 professionals like a mastermind, beneficiary, director were arrested. In view of the high proportion of availing and utilization of fake ITC, a special campaign was launched at the national level against bogus GST invoices on 9th November 2020, which is still in progress.
However, in view of the severe outbreak of COVID pandemic and the associated security concerns during the last two-three months, the campaign slowed down but with the gradual lifting of lockdown in various parts of the country and improvement in the situation of COVID-19, the department has resumed the campaign in a coordinated manner at the national level. The action of Directorate General of GST Intelligence and all Central GST parties has intensified against fraudsters who caused damage to the exchequer during this month. In this nationwide campaign against such units, Directorate General of GST Intelligence and CGST Zones under CBIC have detected more than 500 cases involving 1200 units and arrested 24 persons during the current financial year. The number of arrests made by CBIC officers is the highest in recent times.
CBIC officers are using state-of-the-art IT tools, digital evidence and also gathering information from other government departments to nab the fraudsters. Along with legislative and procedural changes in the law, the nationwide campaign contributed to better compliance and revenue collection. During the campaign, cases were also registered against some well-known companies for taking advantage of fake ITC.
Some of the major recent cases include the case registered by DGGI Nagpur zone unit against three companies for wrongly passing Input Tax Credit (ITC) of Rs 214 crore and fraudulently claiming refund of total ITC. These companies had submitted bogus rental agreements and bogus electricity bills even though they were present only on paper without any business activity from their registered place of business. These companies were exporting a common product like smoking mixture for pipes and cigarettes, which attract 28 per cent GST and 290 per cent compensation cess.
In another case, DGGI Chandigarh zonal unit registered a case and arrested the mastermind, who was operating fake companies to pass illegal ITC worth Rs 115 crore. Following reports of several iron and steel units located in Himachal Pradesh, Punjab and Haryana being used in passing unacceptable ITC, searches were conducted at several premises in Himachal Pradesh (Baddi) and Punjab, where incriminating evidence of fraudulent transactions was found. Laptops, pen drives, mobile phones containing emails were recovered. Similarly, DGGI Surat Zone unit registered a case of illegal ITC, in which companies were related to supply of invoices and passing illegal ITC of Rs 300 crores which did not exist.
CGST Jaipur Zone detected the involvement of several fake companies in availing/passing fake ITC of more than Rs 100 crore, in which three persons were arrested. In another case of ITC fraud, CGST Delhi Zone had unearthed a network of 23 entities involved in generating fake invoices worth Rs 551 crore and passing illegal ITC of Rs 91 crore. These fake units were issuing invoices for bituminous mixture, base metal, furniture and doors. Three prominent people linked to the fake invoices gang have been arrested. In another case, CGST Ahmedabad zone registered a case of ITC fraud of Rs 38 crore against 13 fake units which were prepared to fraudulently pass ITC by issuing fake invoices of iron and steel.
With an aim to trace and arrest unscrupulous persons involved in illegal activities involving damage to the exchequer, action against fraudsters of fake invoices and other GST evaders is likely to be intensified soon.
Apart from cases of bogus ITC, DGGI and other CGST parties have also detected GST evasion related to misclassification, undervaluation and surreptitious supply of goods and services.