KOCHI: Agents transporting goods like arecanut to other states take GST registration in the name of economically backward people; if the consignment is caught, authorities cannot recover tax and fine as the people have no assets
In a significant development in curbing tax evasion, the state goods and sales tax (GST) intelligence squad has unearthed a ‘bill trading’ fraud in Kerala. The intelligence wing exposed the mafia after a tip-off regarding benami GST registrations taken in the names of persons in low or nil-income categories, who are used by the arecanut smuggling mafia based in Palakkad, Malappuram and Thrissur districts.
According to the intelligence wing, the activity spreads to several states, Nagpur being a major area where goods are transported to.
The issue came to light when a consignment of arecanut sent in the name of one such benami dealer, Prasanth Traders, was detained by the GST intelligence squad near Vazhikkadavu in Palakkad. The dealer, who allegedly transported almost 20 consignments worth crores of rupees, between July 1 and 15, has an annual income of `500, as per his ration card details.During the course of inquiry, Prasanth gave valuable leads to the agents about the lobby in this trade. A joint effort by the police and GST intelligence led to the arrest of Manikandan, a prime agent in the trade, who approached Prasanth and threatened him with kidnapping.
A writ petition was filed in the Kerala High Court by Prasanth against the notice issued by the GST authorities alleging evasion of tax by him. He sought to quash the proceedings against him, saying the transaction in his name was done under threat by the agents. In the counter filed before the High Court, the GST department, through government pleader Dr Thushara James, said bill trading by way of generating fraudulent bills and effecting transactions in benami names is the latest technique of tax evasion. The racket will take GST registration in the name of a person who may have financial difficulties and misuse this for tax evasion in multiple ways.
It stated that unlike the state VAT mechanism, under the GST regime, any person desirous of conducting a business could apply for a GST registration. The documents sought at the time of registration do not include any kind of security or bank guarantee and solvency certificate. Thus, any person with a PAN card can apply for and secure a valid GST registration.
The person taking the registration may be offered substantial amounts for using his/her registration number and for using details to transport goods and conduct business. He may not have any knowledge about the transactions that may be carried out using his registration number. In most cases, even the mobile number given in the application form for registration is used by the agent or the real owner and that person transports the goods using the name and registration number of the benami.
If the person in whose name the registration is taken is caught, the GST authorities may proceed against him in vain, as he would have no assets or liquidity to remit tax for the transaction carried out by him. If the dealer is able to cancel the registration, it is possible that the entire transaction may go unnoticed.
‘Dealer’ facing threat from traders
The GST ‘dealer’ against whom a major tax evasion case was registered appeared before the Kerala High Court through video conferencing and said he was a victim of a large arecanut mafia trading illegally. The mafia, with partners in different states, have made him and others like him a scapegoat, he said. He declared that he is willing to cooperate with the intelligence squad, but has been facing threat to his life from the traders involved.
What is bill trading
Bill trading refers to a method by which the bills are issued in the name of a stranger to the business, but in whose name the GST registration has been taken for transporting goods. Everything will be operated by the agent or the persons behind the transaction who receive financial benefits out of the business. Rampant misuse of GST registration and repeated attempts of tax evasion have been detected in Kerala and key persons arrested, as per the government pleader’s submission. In some instances, the goods have crossed the state borders before the officers could detain the consignments.