Crackdown on tax evasion! GST officers unearth over Rs 35,000 cr fraud in FY'21, arrest 426 persons

In the year-long crackdown on tax evasion, the GST authorities have unearthed over Rs 35,000 crore of tax fraud committed by misuse of input tax credit provision under the Goods and Services Tax (GST) regime.

During the 2020-21 financial year, the CGST zones and the Directorate General of GST Intelligence (DGGI) booked about 8,000 cases involving fake ITC of over Rs 35,000 crore, a statement from CBIC said.

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Under the GST regime, at the time of paying tax on output, entities can reduce the tax they have already paid on inputs.

Some have, however, misused the provision by creating fake invoices on inputs.

"Misuse of the beneficial provision of ITC under the GST regime is the most common modus of evasion under the GST law," the statement said.

"The field formations of the Central Board of Indirect taxes and Customs (CBIC) have been regularly detecting such cases from the very beginning of the GST regime."

During 2020-21 (April 2020 to March 2021), 426 persons, including 14 professionals such as CAs, lawyers and directors, were arrested.

"Considering the high proportion of fake ITC availment and utilisation, a nationwide special drive against the fake GST invoice was launched with effect from November 9, 2020 which is still continuing," it said.

"However due to the serious Covid pandemic spread during the past two three months and related safety concerns, the drive slowed down but with gradual lifting of lockdown and improved Covid-19 situation in different parts of the country, the department has resumed the drive in coordinated action at national level," the statement said.

The crack-down by Directorate General of GST Intelligence and all the Central GST formations against the fraudsters responsible for causing loss to the government exchequer has gained momentum during this month.

In the nationwide drive, Directorate General of GST Intelligence and CGST Zones under CBIC have during the current financial year detected more than 500 cases involving 1,200 entities and arresting 24 persons.

The number of arrests made by officers of CBIC is one of the highest in recent times, the statement said.

CBIC officers are using the latest IT tools, digital evidence and also collecting information from other government departments to catch the fraudsters.

"Along with legislative and procedural changes in the law, the nationwide drive has contributed to better compliance and revenue collection. During the drive, cases of fake ITC availment against some well-known companies were also booked," the statement said.

Some of the notable cases booked recently include a case by DGGI Nagpur Zonal Unit against three firms involved in passing on fraudulent ITC to the tune of Rs 214 crore and claiming refund of accumulated ITC in fraudulent manner. These firms had submitted fake rental agreements and fake electricity bills and they existed only on paper without any business activities having taken place from their registered place of business.

These firms were showing exports of a common product i.E. Smoking mixtures for pipes and cigarettes attracting GST at the rate of 28 per cent and Compensation Cess of 290 per cent.

In another instance, DGGI Chandigarh Zonal Unit booked and apprehended a mastermind, who was operating fake firms for passing on illegal ITC to the tune of Rs 115 crore.

On information that fictitious/bogus firms were used to pass inadmissible ITC to various iron and steel units based in Himachal Pradesh, Punjab and Haryana, searches were conducted at multiple premises in Himachal Pradesh (Baddi) and Punjab where incriminating evidences in the form of laptop containing incriminating emails, pen drives, mobile phones evidencing fraudulent transactions were resumed.

Similarly a case of fraudulent ITC was also booked by DGGI SuratZonal Unit in which non-existent firms were found to be engaged in supply of invoices and passing on illegal ITC to the tune of Rs 300 crore.

CGST Jaipur Zone detected a case involving multiple fake firms for availment/ passing on fraudulent ITC of more than Rs 100 crore in which three persons were arrested.

In another case of ITC fraud, CGST Delhi Zone busted a network of 23 entities involved in creation of fake invoices worth Rs 551 crore and passing on fraudulent ITC worth Rs 91 crore. These fake entities were issuing invoices of bituminous mixtures, base metals, furniture and doors. Three key persons involved in this fake invoice racket have been arrested.

In another instance, CGST Ahmedabad Zone booked a case of ITC fraud of Rs 38 crore against thirteen fake entities which were created to pass on fraudulent ITC by way of issuing bogus invoices of iron and steel.

"The enforcement drive against the fake invoice fraudsters and other GST evaders is likely to intensify with an objective to catch and book unscrupulous elements engaged in illegal activities to defraud the government exchequer," the statement said.

Apart from cases of fake ITC the DGGI and other CGST formations have also detected GST evasion involving misclassification, undervaluation and clandestine supplies of goods and services, it said but did not give details.