Instakart, Swiggy allegedly used fake manpower firm to get ITC to fraud GST: Tax Dept

Instakart (a subsidiary of Flipkart) and Swiggy allegedly used fake manpower supply to get Input Tax Credit (ITC) and fraud Goods & Services Tax (GTS), sources in the Department of Revenue have said.

However, Instacart and Swiggy strongly refuted the allegations.

Tax sleuths raided various premises of these two companies this week. According to sources, Swiggy has deposited the amount involved in fraudulent ITC availment worth ₹27.51 crore, pending investigation. Meanwhile, Patiala House District and Session Court has fixed January 13 to hear anticipatory bail petitions filed by two senior officials of Instakart. These officials are yet to comply with the summons of Directorate General of GST Intelligence (DGGI) in fake GST invoice frauds of availment and passing on of ITC (input tax credit) worth ₹ 21 crore.

Sources denied the claims of Swiggy and Instakart that this fraudulent ITC availment and pass on was a matter of GST compliance only with their vendors, and added that the connivance of these companies in the fake invoice frauds is very much an open fact with all the layers exposed in data analytics. Also, the arrested mastermind Gagan Gupta alias Gagan Kumar has admitted to have committed the ITC scams in connivance with Instakart and Swiggy through various fake firms of manpower supplies to both business entities and where cash was used to exchange hands later, sources said.

According to DGGI sources, Gagan Gupta with his fake firms, namely Orient Services, Royal Enterprises and Liya Trading Services used to issue invoices without actual supply of services and passed on fraudulent ITC to various non-existent firms including Surya Team Management Pvt. Ltd. (STMPL), Merlin Facilities Private Limited (MFPL) and Greenfinch Team Management Pvt. Ltd. (GTMPL), which in turn had passed on fraudulent ITC to several companies including Instakart and Swiggy.

Companies’ response

A spokesperson for Swiggy strongly denied allegations that it has been complicit in any wrongdoings by Greenfinch (a third-party vendor), with respect to it being a fictitious entity and availing bogus input tax credit.

According to the spokesperson, the issue dates back to November 2019 wherein a matter concerning the non-payment of GST by the vendor, a follow-on GST Survey was conducted at the Swiggy office. Swiggy fully cooperated with the authorities to substantiate the services received. During this survey, Swiggy was coerced to reverse the input tax credit citing certain irregularities by the same vendor as they were untraceable. This reversal of credit was made without prejudice, and by reserving the company’s rights to recover it following the due process of law. As a result of this action, Swiggy also initiated legal proceedings against the vendor, and an arbitration process is currently underway. Subsequently, an income tax survey was conducted this week as a follow-on action wherein the Swiggy team has provided all documents to the authorities and proved our bonafide.

A Flipkart spokesperson called the entire episode as ‘factually incorrect’ and vehemently denied any allegation. The investigation by the GST authority is on the alleged GST default by two manpower service providers of Instakart and should not be misconstrued as being related to any wrongdoing by the company. As required by the GST authority, it has participated in the investigation proceedings and submitted several documents/ information in relation to the investigation.

“Our transactions with these service providers are based on the valid GST registration certificate issued to them by the department, associated PAN, ROC records of the service providers, due diligence reports, service agreements, attendance records of the manpower employed by Instakart and GST invoices which have been paid through the banking channels. Our actions are within the legal framework of the tax and legal requirements and we are committed to supporting the authority as they complete this investigation,” spokesperson said.