THIRUVANANTHAPURAM: The State GST Department has successfully apprehended two key suspects involved in an input tax credit fraud carried out by a multi-state ‘areca nut cartel’. The joint operation to dismantle the cartel was conducted by the State GST departments of Kerala and Karnataka last month.
The arrested individuals have been identified as Kattungal Aliyar Ashraf, 48, from Aluva, and Shoukath, 54, from Vandanam in Alappuzha. Both have been remanded to judicial custody as per the statement issued by the GST Department. The cartel consisted of 43 firms across different regions of the country with GST registrations.
Over a period of ten months, the group orchestrated a massive input tax credit (ITC) fraud, generating fake invoices amounting to `850 crore without engaging in any actual trade or supply of goods. As a result, the cartel managed to avail or pass on ineligible ITCs totalling Rs 9.15 crore. The investigation is ongoing, and more arrests are expected in the days to come, as numerous records and transactions need thorough examination, stated an officer.
Suspicions have arisen regarding substantial transactions made from the bank accounts of some of the accused, indicating potential involvement in the laundering of black money. The fake firms connected to the cartel are scattered across several states, including Kerala, Karnataka, Tamil Nadu, Maharashtra, Madhya Pradesh, Gujarat, and Delhi. The GST department’s Intelligence Unit at Kanhangad played a crucial role in identifying the cartel. In Kerala, the cartel was primarily linked to major areca nut-growing districts such as Kasaragod, Kannur, and Wayanad.
Additionally, the accused profited significantly from the illicit transportation of large consignments of areca nuts from South Indian states to gutka manufacturing companies based in Maharashtra. The cartel facilitated sellers and buyers in carrying out unrecorded transactions to evade taxes.
By employing fake firms to generate bills and invoices for inter-state transportation, the goods were ultimately attributed to small businesses that do not require GST registration, while the actual buyers were major gutka companies. This scheme allowed gutka manufacturers to use unaccounted raw materials, enabling them to manipulate output and evade the 28% GST, cess, and other duties on their manufactured goods, thereby saving substantial amounts of tax.