GST frauds through fake invoicing and circular trading of input tax credits continue to plague the system. Recently, CGST Delhi East busted one such major racket involving 48 bogus firms that had fraudulently availed ITC credits worth Rs 199 crores. In a meticulously planned operation named “Clean Sweep”, officers were able to dismantle the network and nab the key operators.
Key Highlights of the Fraud
i) 48 interconnected fake/bogus firms identified that were issuing fake GST invoices without actual supply of goods or services
ii) Fraudulent ITC of over Rs 199 crores availed by the fake firms
iii) 3 persons apprehended and arrested; sent to 14 days judicial custody
iv) Masterminds and key members of the syndicate identified; manhunt on
v) Proprietor of M/s MK Traders availed fake ITC of over Rs 5 crores
vi) Incriminating materials like stamps of 55 firms, SIM cards, ID documents recovered
Modus Operandi of the Fraudsters
The CGST Delhi East officials had received intelligence inputs about the network of fake firms. Further investigation was carried out through:
i) Data mining and data analytics
ii) On-ground intelligence gathering
iii) Information development
It was found that the fake firms were essentially non-existent entities on paper that were issuing bogus GST invoices without actually supplying any goods or services. This is an offence under GST laws.
The fraudsters were availing and utilising the fraudulent ITC from such fake invoices to reduce their GST liability. Over Rs 199 crores of fraudulent ITC was identified to be availed by the fake firms.
Action Taken in Operation Clean Sweep
The CGST Delhi East officials launched a coordinated special operation named “Operation Clean Sweep” to crack down on the GST fake invoice fraud.
Intensive searches were conducted and three key persons involved in the fraud were apprehended and arrested. They were produced before the Chief Metropolitan Magistrate Court, Patiala House and sent to 14 days judicial custody.
The masterminds and ring leaders behind the fake firms network have also been identified and manhunt is underway to nab them.
Further investigations led to identification of the proprietor of M/s MK Traders as one of the key accused who had availed fraudulent ITC of more than Rs 5 crores.
Impact and Effectiveness
The special operation was conducted in difficult terrain involving narrow lanes and sensitive areas of Delhi. It was made possible by the support and cooperation of Delhi Police who provided adequate police force to assist the GST officers.
Through the action, the government has sent a strong message to GST fraudsters that such illegal activities will not be tolerated.
Over Rs 199 crores of fraudulent ITC claim has been busted which is a big achievement. The arrest of the fraudsters and identification of the key accused is expected to help unearth more such fake firms networks involved in GST frauds. Further investigations are ongoing into the case.
The coordinated effort between GST officials, Delhi Police and the judiciary demonstrates the systemic effectiveness to clamp down on economic offences like GST fraud. It sets a positive precedent for the future.