Several Firms in Madhya Pradesh Under GST Radar for Fake Invoices

Over 150 companies have been identified to be involved in Goods and Services Tax (GST) fraud, which has also discovered at least 30 fake firms. They used fake under GST invoices valued at hundreds of crores in about a dozen districts of Madhya Pradesh.

The Director General of GST Intelligence (DGGI), Bhopal zonal office has initiated the move and is running an operation to search in districts to nab the extent and links of the major fraud.

Among other operations, the DGGI is tasked with gathering, compiling, and disseminating information about fraud detection and Central Excise Duty, Service Tax, and GST avoidance on an all-India basis.

The board are in search of the tax evaders under the radar in districts including Bhopal, Indore, Ujjain, Jabalpur, Rewa, Sindhi, Shahdol, Katni, Sagar, Khandwa, and Khargone district and involves chains of coal suppliers too, sources stated. Under the operation, a similar swoop is also being carried out in other regions of the country by DGGI teams of respective states, according to the sources. Surjit Bhujbal, Principal Director General, DGGI, New Delhi is leading this country-wide operation.

After receiving information from the Noida (Uttar Pradesh) police, who on May 1 busted a gang running a GST fraud network worth over Rs 10,000 crore throughout India and arrested eight people from Delhi, Mumbai, and various other districts of Uttar Pradesh as well, the search and seizure operations in Madhya Pradesh began three days ago.

The gang was functioning in two teams. Aadhar cards and PAN cards were used to generate up to 2660 fake firms with GST numbers by one team, which were then registered in various states and sold to another team for hefty sums of money (an average of Rs 80,000–90,000 per firm).

The second team then claimed GST input tax credits (refund of GST) without actually supplying or transporting any goods or services, resulting in revenue losses to the government of thousands of crores. The fraudulent invoices (bills) were created in the names of these bogus organizations. 

According to the Noida police's early investigation, bogus bills of Rs 2-3 crores were produced by each fictitious business each month. The Noida police are currently searching for seven people who brought information about the fraudulent firms that the group of eight detained people had established.

In Madhya Pradesh, Over 150 corporate organizations employed 30 of these fictitious businesses to carry out the scam. As of right now, as part of the operations, around Rs 2 crore in cash and a number of damning papers have been confiscated, and investigators have discovered proof of GST fraud amounting to hundreds of crores. According to reports, the precise amount of fraud will only be known when the procedures are over. Over 50 DGGI personnel are now involved in the search and seizure activities, which are expected to go on for at least another week.

Read also: Quick to Check Fake Invoice with Fraud Complaint Under GST

The investigation team discovered multiple violations, including the registration of three fictitious businesses at the same address using false lease agreements by the criminals. According to reports, the name of an owner who passed away three years ago was used on a fake rent agreement in one instance in the Sagar region.

The DGGI team has not disclosed the identities of those who were engaged since it is still looking into the fraud's deeper connections. The fact that organizations in the coal supply chain in the districts of Rewa, Katni, Shahdol, and Sidhi were discovered to be implicated in the fraud suggests that there may be connections to the Chhattisgarh coal tax scandal.

In a separate incident, the DGGI Bhopal office team detained a person on May 23 in the early morning hours who was also engaged in GST fraud using false invoices. This guy was detained and used by a fictitious company to work as a subcontractor for another subcontractor of a company that accepts state government contracts for water and road projects. His questioning is expected to reveal connections to the people who utilized the fictitious company to execute the real GST fraud (using bogus bills to obtain input tax credit).