GST Evasion: Massive network of fictitious firms that generated ₹300 Cr. worth fake ITC discovered

GST Evasion: Massive network of fictitious firms that generated ₹300 Cr. worth fake ITC discovered

GST evasion - fictitious firms - fake ITC - taxscan

The Central Goods and Services Tax (CGST) Commissionerate, Delhi (East) has conducted another investigations unearthing a massive network of fictitious firms used to generate and avail fake Input Tax Credit (ITC) of Goods and Services Tax (GST).

This network was being operated by one Naresh Dhoundiyal in connivance with one Devender Kumar Goyal, who is a Chartered Accountant by profession. Both Naresh Dhoundiyal and Devender Kumar Goyal are former employees of Essel Group. Though they are presently not working with the Essel group officially, however, they were passing on inadmissible ITC to the said group. Investigations indicated that a layer of genuine looking fictitious intermediatory companies were created to pass on bogus ITC from non-existent and fake firms to the companies of Essel Group without actual supply of any goods or services. This was apparently done to enable Essel Group to avail inadmissible Input Tax Credit of GST, book expenses to evade Income Tax, and inflate their turnover to push the share prices of their listed companies.

The accused Naresh Dhoundiyal incorporated multiple fictitious intermediatory companies for Essel Group while the other co-accused Devender Kumar Goyal arranged the fake invoices of various other fictitious and non-existent firms for such fictitious intermediatory companies. The total fake Input Tax Credit passed on by such fictitious intermediatory companies amounts to ₹ 92.18 Crore whereas, the total fake Input Tax Credit passed on by other fictitious and non-existent firms pertaining to the larger network is more than ₹ 300 Crore. Thus by issuing bogus invoices of more that ₹ 3000 Crore without actual supply of any goods or services, the syndicate has defrauded the Government exchequer of more than ₹ 392 Crore.

Both the accused has been arrested under Section 69(1) of the CGST Act, 2017 and remanded to judicial custody of 14 days. They will be charged under Section 132(1)(b) and 132(1)(c) of the CGST Act, 2017 which are cognizable and non-bailable offences as per the provisions of Section 132(5) and punishable under clause (i) of sub section 1 of Section 132 of the Act. Since the inception of GST Central Tax, Delhi Zone has made 30 arrests in various cases involving GST evasion amounting of more than ₹ 4450.86 Crore.

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