Madhya Pradesh: 30 fake firms, 150 entities involved in GST fraud worth hundreds of crores

GST Intelligence teams conducting search and seizure operations in a dozen districts


At least 30 fake firms and over 150 entities have been found to be involved in Goods and Services Tax (GST) fraud using fake invoices (bills) worth hundreds of crores in about a dozen districts of Madhya Pradesh. 

Teams of the Bhopal zonal office of the Director General of GST Intelligence (DGGI) are conducting search and seizure operations in the districts to find out the extent and links of the mega fraud. 

The DGGI is involved in collection, collation and dissemination of intelligence relating to evasion of Central Excise Duty, Service Tax and GST, on an all India basis and unearthing modus operandi of evasion among other functions.

The raids are being conducted in districts including Bhopal, Indore, Ujjain, Jabalpur, Rewa and Sidhi, Shahdol, Katni, Sagar, Khandwa and Khargone districts and involves chains of coal suppliers too, sources told THE WEEK. Similar raids are being conducted in other parts of the country, too, by DGGI teams of respective states, they added. The country-wide operations are under the guidance of Surjit Bhujbal, principal director general, DGGI, New Delhi.

The search and seizure operations in Madhya Pradesh started three days ago after inputs from the Noida (Uttar Pradesh) police that on May 1 busted a gang operating the GST fraud network worth over Rs 10,000 crores across India and arrested eight persons from Delhi, Mumbai and different districts of Uttar Pradesh. 

This gang operated in two teams – one was involved in forming as many as 2660 fake firms with GST numbers, created through stolen identities (Aadhar card, PAN card), registering them in different states and selling them to another team for high fees (average Rs 80,000-90,000 per firm). 

The second team then used fake invoices (bills) made in the name of these fake firms to claim GST input tax credits (refund of GST) without any actual supply/transport of goods or services, thus causing revenue losses worth thousands of crores to the government. 

Fake bills worth Rs 2-3 crores were generated per fake firm per month, according to the preliminary probe by the Noida police. The Noida police are now on lookout for seven persons who brought the details of the fake companies created by the team of the eight arrested persons.

Sources told THE WEEK that in Madhya Pradesh, 30 of such fake firms were used by over 150 business entities to commit the fraud. As of now, about Rs 2 crores cash and several incriminating documents have been seized as part of the operations and officials have found evidence of GST fraud worth hundreds of crores. A proper figure of the extent of fraud will be determined only when the operations conclude, sources added. The search and seizure operations, involving over 50 officials of the DGGI, are likely to continue for at least another week.

The team found several offences including that the perpetrators had registered three fake firms at the same address using fake rent agreements. In one case in Sagar district, the fake rent agreement used the name of an owner who died three years ago, sources said.

No names of involved persons have been given out by the DGGI team as deeper links in the fraud are being probed. Since entities in the coal supply chain in Rewa, Katni, Shahdol and Sidhi districts have been found to be involved in the fraud, the implications of the fraud could be high and there might be links to the coal levy scam in Chhattisgarh, sources said.

Meanwhile, in an unrelated case, the DGGI Bhopal office team had in the wee hours of May 23 arrested a person who was also involved in GST fraud using fake invoice. This arrested person operated a dummy firm as a subcontractor to another sub-contractor of a firm that takes state government contracts on roads and water resources projects. His interrogation is likely to provide links to the actual beneficiaries of the fraud – meaning the persons who used the dummy firm to commit the actual GST fraud (using fake bills to claim input tax credit), sources said.

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