Inter-State fake GST claim racket: 100 bogus firms detected; mastermind held in Mysuru
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Inter-State fake GST claim racket: 100 bogus firms detected; mastermind held in Mysuru

January 19, 2024

Shell companies issued counterfeit invoices worth Rs. 1,008 crore with illegal tax credit of Rs. 180 crore

Bengaluru: In a joint operation, the Commercial Tax authorities of Karnataka and Kerala have busted a large-scale fraud encompassing more than 100 bogus firms engaged in the issuance of fake tax invoices and creation of fake Input Tax Credit (ITC).

The mastermind behind this multi-State GST fraud, Mohammed Siddiq, was arrested in Mysuru on Wednesday. He faces charges related to obtaining dummy GST registrations through forged documents and facilitating a scrap business across Kerala, Tamil Nadu, and Karnataka.

According to Commercial Tax Department, Bengaluru, Siddiq played a pivotal role in generating fake tax invoices that allowed dealers to make spurious claims of ITC without remitting the corresponding taxes to the respective Governments following the initial transactions.

Commissioner of Commercial Taxes Department C. Shikha disclosed that these fraudulent firms were issuing tax invoices without actually delivering any goods. The investigative team had been monitoring these irregularities for several months before successfully tracking down Siddiq.

Department officials revealed that these bogus firms collectively issued counterfeit invoices totalling Rs. 1,008 crore, resulting in an illegal Input Tax Credit of Rs. 180 crore. This joint operation, spanning over two days and conducted in collaboration with Kerala State GST authorities, brought to light significant fraudulent activities, as stated in the press release.

“The accused utilised forged documents to acquire dummy GST registrations, thereby facilitating scrap businesses in Kerala, Tamil Nadu, and Karnataka. Subsequently, he issued fake tax invoices, misappropriating Input Tax Credit without remitting the taxes to the governments in the initial transactions,” the press release added.

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Officials emphasised that this scheme was designed to offset outward tax liability, evading GST cash responsibilities on outward supplies and leading to substantial losses to the Government exchequer.

The investigating team, led by the Joint Commissioner of Commercial Taxes (Vigilance) in Bengaluru, unravelled a systematic modus operandi employed by certain traders, with accomplices identified in Mysuru, Mangaluru, and Kerala. Additionally, officials identified the complicity of certain auditors and GST practitioners in these fraudulent activities.

The Department claimed to have successfully dismantled a GST fraud racket involving approximately 100 bogus registrations across Karnataka, Kerala, and Tamil Nadu.

 Earlier arrest in Mysuru

It may be recalled here that early this month, the Officers of Headquarters Preventive Unit, Central Tax GST Office, Siddarthanagar, Mysuru, had unearthed a sophisticated fake invoice racket, involving a tax evasion of over Rs. 14 crore for GST bills of Rs. 60 crore and had arrested Imran, proprietor of Rub Traders, Mysuru, on Jan. 8, 2024.

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