How a CA aspirant pulled off Rs 50 crore GST input tax credit fraud

The kingpin of this racket is said to be Prince Manish Kumar Khatri, a third-year student and a partner in a Chartered Accountancy firm

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The Directorate General of GST Intelligence (DGGI) has detected around 115 fake firms spread over nine GST Commissionerates illegally claiming input tax credit to the tune of Rs 50.24 crore.

The kingpin of this racket is said to be Prince Manish Kumar Khatri, a third-year student and a partner in a Chartered Accountancy firm. Khatri has been arrested in Ahmedabad for registering fake firms, generating illegal availment and wrongfully passing on the benefit of the Input Tax Credit (ITC) to the tune of Rs 50.24 crore.  

Finance ministry sources said that Khatri is allegedly the key person involved in registration of 115 non-existent firms and filing of GST returns of such fake firms, thus passing on ineligible ITC for wrong availment and utilisation of GST payment.  

According to these sources, the DGGI through data analytics noticed that 55 suspicious firms were registered under the jurisdiction of Commissionerates of Vadodara and Ahmedabad with a few mobile numbers and e-mail IDs. On further analysis of these suspicious firms, it was found that the cash credit ratio of tax payment was very less. Data analysis showed that for the period during which these firms were active, the ITC availed and ITC utilised for filing GSTR 3B were almost same.  

It, therefore, concluded that these firms might be issuing fake invoices to the recipients without actual supply of any goods/services which, in turn, were availing Input Tax Credit (ITC) on the basis of these fake invoices.

Finance ministry sources said that the DGGI then obtained the IP addresses used at the time of monthly GST return filing and mobile numbers used for receiving OTPs for authentication of GST-related works. With the help of these IP addresses and their service providers, the actual physical locations of the premises were detected where the said activities -- registration of fake firms, filing of GST returns, etc., -- were being undertaken.

The DGGI investigation found that these firms issued invoices mainly in relation to supply of manpower and consultancy services. The units were registered in rural areas of Dahod on the basis of documents obtained fraudulently. Out of 115 fake units, 49 of them fall under Ahmedabad North Commissionerate, 27 under Vadodara-II Commissionerate, 15 under Bhiwandi Commissionerate, 12 under Gandhinagar Commissionerate, five under Ahmedabad South Commissionerate, three under Jodhpur Commissionerate, two under Vadodara-I Commissionerate and one unit each under Thane Rural Commissionerate and Bhavnagar Commissionerate.  

Finance Ministry sources said that rigorous data mining and data analytics have helped in a big way in curbing the fake firms and fraudulent ITC claims. "Now the use of Aadhaar in GST registration will bring better control over such unscrupulous professionals who try to create bogus/fake firms for GST evasion by fraudulent availment and passing on of ITC. Such elements are also, very often vocal on social media against various apt measures taken by the government on GST to curb bad/malign practices," said a top source. 

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