Economy

Cracking the case of 115 fake firms

New Delhi | Updated on October 23, 2020 Published on October 23, 2020

How sleuths from GST intelligence tracked down a financial don and solved a fake invoicing case

Don ko pakadna mushkil hi nahin, namukin hai” (It is not just difficult to nab don, it is impossible),” was the famous dialogue of Amitabh Bacchan in the blockbuster movie of the same name, where cops in 11 countries were waiting to catch him.

In real life, however, sleuths from GST intelligence managed to nab a canny financial don, Prince Manish Kumar Khatri, wanted by nine tax commissionerates. The incriminating paper trail led them to the Ahmedabad-based chartered accountant-in-the-making who had registered 115 fake firms and filed their GST returns, to avail input tax credit (ITC) to the tune of over ₹50 crore.

It was noticed that over 50 firms were registered on a few mobile numbers with e-mail ids.

The 115 fake firms were spread over different commisionerates of Gujarat, Rajasthan and Maharashtra, ranging from Ahmedabad to Vadodara to Jodhpur and Thane. The firms issued invoices mainly in relation to supply of manpower, AMC and consultancy services.

The tax officials scented foul play when they found the cash-credit ratio of tax payment to be very less. Also, for the period for which these firms were active, the ITC availed of and that utilised for filing GSTR 3B were almost same.

They deduced that these firms might be issuing fake invoices to recipients without actual supply of any goods/service which, in turn, were availing of ITC based on these fake invoices.

Chasing the clues

To crack the case, the IP addresses from which these registrations were taken, 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 were obtained. When they checked out the IP addresses, it was found that these pertained to some data service providers.

Chasing the clues provided by these IP addresses, the investigative team managed to track down the actual physical locations of the premises where the malafide activities — registration of fake firms, filing of GST returns, etc — were being undertaken.

Checks and balances

After the case was solved, a senior Finance Ministry official said the law is being tightened to weed out such malpractices. Moreover, “the government is considering putting such dubious firms under risk category like in case of export firms, and can block their refunds, besides other appropriate legal actions, if found involved in deceitful practices,” he said.

According to Pritam Mahure, a chartered accountant, the Government should design a foolproof strategy to address the fake invoicing menace by, perhaps, forming a special task force. However, he also warned that the government may have to tread on a tight rope as if it takes very stringent steps, it may end up increasing the compliance burden for genuine tax payers.

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Published on October 23, 2020
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