GST sleuths smell ‘political funding’ in fake invoice frauds

However, they found that this fraud was only a part of a scheme to convert white money to black to facilitate political funding.
For representational purposes
For representational purposes

HYDERABAD: GST Intelligence sleuths pursuing a trail of tax evasion through fake invoices recently ended up knocking on the doors of a couple of India’s top infrastructure companies, which seemed to be the end beneficiaries of the fraud. However, they found that this fraud was only a part of a scheme to convert white money to black to facilitate political funding.

It is hardly a surprise for investigators that the fake invoices were generated to show expenditure towards non-existent supplies. This was done only to create an outward trail of money from the balance sheet.
Over the last month, as many as 32 premises belonging to 27 persons were raided by the investigators. Some of these companies are fictitious and non-existent. However, input credit has been passed on to seven to eight other companies, who have in turn passed it on to three to four mega infrastructure companies. According to sources, the total value of invoices generated is Rs 1,668 crore, and the total evasion of tax amount to Rs 174 crore to begin with. Three persons have been arrested so far in order to prevent tampering of evidence, and Rs 20 crore tax has been realised. The big companies, meanwhile, agreed to pay back, said sources.

A demand notice asking why action should not be taken against them has been issued, and upon admission, they have agreed to pay up the evaded tax along with 100 per cent penalty and interest as per norms. As on date, these big firms have decided to “buy peace from being arrested” and agreed to pay up Rs 23 crore as further investigation is on. “That’s not the end of it. They are liable for prosecution,” said sources.

“We have enough indications to say that the money is used for political funding. The fake invoicing has become a compulsion for big companies to show the routing of cash outwards from the company,” said an official in the know of things.

The role of the big players was unearthed after the nabbing of fake suppliers or persons operating fake entities. “The big companies have registration in each State and suppliers all over India. It is very difficult to detect such a fraud as it involves circular trading. In this case, we detected a few fake suppliers and then investigated upwards,” said the official. For instance, in order to legally remove Rs 100 crore from the balance sheet, a company may show delivery of some non-existent services or goods for which it is billed. The input tax credit from fake bills is, however, used to lower its tax liability. “That’s just a bonus for the company. Our role is limited to detecting GST frauds. The money laundering aspects will be investigated by multiple agencies with whom we share information,” he said. 

Fudging of balance sheets also allows the companies to raise bank loans. According to officials, GST frauds are only the tip of the iceberg, as aspects like IT evasion, money laundering, bank frauds, etc, follow.

Related Stories

No stories found.
The New Indian Express
www.newindianexpress.com