One arrested in tri-state commercial tax fraud of Rs 410 crore

BENGALURU: The Commercial Tax Department officials have busted a racket creating fake tax receipts and defrauding the exchequer of hundreds of crores with the arrest of one person. The fake tax receipts were generated in Karnataka, Andhra Pradesh and Tamil Nadu.

The operation was conducted by officials of the Enforcement Wing of the Commercial Taxes Department, South Zone and the arrested was identified as Tauqir alias Mohammed (42). The accused, along with other accomplices, set up fake firms and they were creating fake tax receipts and committing fraud.

It has come to light that the accused defrauded about Rs 410 crore by establishing several fake business firms in Karnataka, Tamil Nadu, and Andhra Pradesh. The fraud was committed by creating fake tax receipts without supplying goods. The accused gave the bills they created to work contractors and traders and cheated them. This caused a loss of crores of rupees to the government exchequer.

During interrogation, the arrested accused revealed fraud amounting to Rs 410 crore. Of this, Rs 102.5 crore involves fake input tax credit.

How was the fraud done?

The accused would obtain rental and lease agreements by providing fake addresses. They had a foolproof plan by registering these documents, and using other people’s PAN and Aadhaar details for those addresses, they would start proprietorship or limited liability partnership companies.

They would get GST registration by submitting rental agreements and company registration documents and used these GST numbers to create fake invoices. The accused opened several bank accounts in the names of different individuals, showing some as service provider companies, some as intermediary companies, and others as the final buyer person or company.

They created fake invoices in the name of purchases of materials like cement, iron rods, zinc sheets, and pipes. These invoices were transferred from one company to another. Based on those invoices, they claimed Input Tax Credit.

Officials grew suspicious about the fake invoices and illegal Input Tax Credit. As soon as officials came and issued notices, the companies’ registrations would be closed The investigation revealed that they would then start new companies.