HYDERABAD: Investigating into a first of its kind case of tax evasion, running into crores of rupees, through a network of dummy firms that availed and utilised fraudulent input tax credit, the Hyderabad GST commissionerate suspects the involvement of big manufacturing companies. Officials have found out that the modus operandi has been in place for the last nine months, even though the GST is a recent tax reform.
Multiple possibilities have emerged from what is available as of now, though sleuths are continuing with further searches as part of the probe. “If a dummy firm, though registered with GSTN using PAN details of a real person, has declared Rs 8 crore as tax paid, at least Rs 80 crore worth transactions should have taken place. That’s impossible as there has been no movement of goods,” said an official explaining the possible flow.
“The procurer could have issued several cheques to show in the books that the money was deposited. But this could have been handed over back to the procurer, in cash. Then, it becomes black money,” added the official. Another possibility was that there were attempts to jack up the turnover of dummy companies through imaginary transactions, making them eligible for huge bank loans. “In any case, input credit will be available only if the movement of goods take place, which is absent. Motives behind the fraud could be multiple,” said the official, pointing out that scrutiny and subsequent mismatch of GSTR-1, GSTR-2 and GSTR-3 forms unearthed fraud. The officials are planning to write to other agencies like Income Tax & Registrar of Companies on other aspects of fraud.
While the sleuths appear confident of reaching the beneficiary of the tax evasion, it may not be easy. According to sources, for instance, if tax paid on output (final product) is around Rs 100, and total tax paid on input (purchases) is Rs 90, the tax paid to the government is only Rs 10, thanks to input tax credit.
“The entire Rs 90 may not be tax evaded through dummy firms. The evasion could be Rs 40 or even Rs 85. Going after every suspected manufacturer may not yield results,” said sources. On Friday, two persons who had issued fake invoices levying GST without actual supply of goods or services against said invoices were arrested. As many as 20 dummy firms spread across AP and TS were identified, based on invoices issued by a company registered in the name of a sanitation worker.