GST dept unearths Shell Companies in Cotton Trade in Ludhiana

GST Evasion - GST - Companies

The Goods and Services Tax ( GST ) department has reportedly detected a scam by three shell firms which sold cotton to five firms of Ludhiana. Such firms claimed the input credit tax (ITC) to the tune of Rs 7.5 crore from the authorities.

The CGST authorities in Hisar reported the matter to their counterpart in Ludhiana to cancel the ICT claim of these firms.

A CGST official said the man who floated the three shell firms and worked as an agent to sell off cotton worth about Rs 150 crore to Ludhiana firms was behind bars in a criminal case.

“After detecting the fraud, we needed to interrogate the person in whose name the firms were registered, for further action under the GST Act. Since the man is in jail, our investigation has got stuck”, the official said.

The department to summon the man who had registered the three firms, i.e, Ankush Cotton and Ginning, Shri Vishnu Traders and Jai Mata Traders.

The shell companies were found to have fake addresses and details and have sold cotton worth Rs 150 crore to five Ludhiana-based units which have a turnover of over Rs 1,000 crore each, he added.

Sources said the spinning mills were in the know of the fraud being perpetrated by the agents and thus purchased raw material (cotton) from them at lower rates. So, without the tax  being paid by anyone in the stream, from arhtiya to ginner to agent — these spinning mills reclaimed ITC from the government.

 “Roughly, this is about Rs 500-crore scam. We do not have enough paraphernalia and staff to go after these fraudsters. These firms functioned in a tricky manner to confuse the tax authorities,” said an officer.

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