Posts Tagged ‘invoice’

Rs 1,200 Crore Fake GST Invoice Scam Busted: GST Dept unearths Rs. 200 Cr Fraud in Bengaluru, 3 Arrested: How is it possible in Digital world?

November 19, 2018

Rs 1,200Crore Fake GST Invoice Scam Busted: GST Dept unearths Rs. 200 CrFraud in Bengaluru, 3 Arrested: How is it possible in Digital world?

Iron and steel – evasion prone commodities: As for as Iron and Steel manufacture and the products thereof, there has been evasion since early 1940s. Even during the 2000, when, they were brought under Componded levy scheme as “evasion prone commodities,” manufacturers and traders could collude with each other and evaded thousands of crores of duty. About“deferred payment,” initially, no time limit was mentioned and thus, many manufactured, cleared without payment of duty under the guise of “deferred payment,” and disappeared! Ironically, at that time, there were loopholes created by the higher officers at the Board level, they could evade technically with the Rules created for the furnace and rolling mills. The builders also colluded with them, as they received goods, used up in the buildings and the cash paid converted into other transactions.  Scrap imports, high sea sales, substitution with local scrap, fake invoices, dealer invoices and such other modus operandi were used where the departments and allied organizations could do little,as most of the evaders escaped with the lack of evidences and loopholes in the Act and Rules.

MNCs, money flow and corruption: As the MNCshave concentrated in and around Bangalore and they have not been worried aboutfinances, skyscrapers, five-star hotels and infrastructure have been developedquickly from 2005 and they have been changed considerably. Thus, the governmentofficials, builders, contractors, building material manufacturers-suppliers,and all other connected persons and agencies played a crucial role in theinfrastructure developments, but also in all sorts of tax evasions. As the MNCsalways claim that they do not give bribes or commissions in any form to anyofficial or facilitator, the connected persons adapted and adopted variousmethods to pump the money, reaching them, so that the work has been going onsmoothly.

Cheap labour coming from North-Eastern India, etc: Bangalore,Hosur, Mysore and other places have been hubs for the MNCs involved in IT industries, electronics, automobiles, chemicals and pharmaceuticals etc., themobility of men and materials have been considerable and huge profits earned. Cheap labour has been / is being brought from north-Eastern India and from Bangladesh. The illegal infiltrators and the so-called migrants, even coming from Myanmar pose great challenge to locals in many aspects. They create new identities, voter cards, Adhar cards, PAN cards etc. Thus, the connected other businesses – Hotels, resorts, pubs etc., also thrived. As goods and services of all sorts are required, where, money is not an issue, every thing has been going on smoothly, as all have been taken care of. However, unfortunately,certain anti-national, terrorist and economic offences criminals joined and spoiled the commercial activities.

34 fake GST registrations – proves the inefficient programming: A scam involving fake GST bills worth Rs 1,200crore has come to light in Bengaluru[1]. The preventive wing of the south commissionerate of the GST busted the racket after two month long investigations[2].The fraudulent companies were engaged in trading of fake tax invoices for availing input tax credit[3]. This has been there, even before the introduction of GST. The accused were engaged in trading of iron and steel scrap through various companies[4].The kingpins of the scam have been identified as Suhail, Basha and Hafeezur. Significantly, in this industry, most of them  have been belonging to one particular group. Suhailand Basha floated 20 fake companies and registered them under the GST by giving fake names and addresses. While Basha had obtained 14 GST registrations in the names of his relatives and others, Suhail had obtained six[5]. They floated fake companies by giving made-up addresses, which made the investigation difficult[6]. Much relaxed provisions of the GST Act and rules, resulted in such manipulations. However, it has to be noted that each must have had 20 plus 14 fake PAN and Aadhar cards also. That implies either they [PAN and Aadhar] and the figuring persons in the cards have been either fake, fictitious or dead. Therefore, the government documents, in this regard have not been fool-proof and the criminals can exploit.

One computer producing fake GST invoices for thefake companies: All companies, however, in reality operated out of a single office and the bill were generated from a single computer[7]. This has been going on even in the case of Service tax, where just to enjoy the Rs20 lakhs limit, they used to float dozens of companies. The modus operandi involved floating fake companies, issuing fake GST invoices and generating e-way bills with fake vehicle registration details without actually supplying goods[8].The companies were created with an intent to fraudulently pass on input tax credit through these fake invoices. “A search was conducted on 12th of November, 2019. We recovered some incriminating documents from 25 locations and have nabbed three persons who we believe to be the key persons involved in generating these fake invoices,” said G Narayanswamy, IRS Commissioner of Central Tax, Bengaluru South. The accused have reportedly generated and issued tax invoices having turnover of about Rs 1,200 crore having a GST liability of Rs 200 crore. Their confessions have revealed that at least 18 iron and steel producers have availed these bills to claim input credit. Further investigations are underway. 

Proceedings initiated: Meanwhile the three accused have been produced in front of the Economic Offenses Magistrate, Koramangala, arrested under the provisions of the GST law and have been remanded under 14-day judicial custody[9].The GST officials have, till now, detected an evasion of Rs 200 crore of GST in the city, and recovered Rs 140 crore so far[10].The team of GST officials included Tej Kumar, deputy commissioner, Akshatha Shrinivas, assistant commissioner and led by G Narayanaswamy, commissioner, Bangalore South detected the fraud. Incidentally, when the officers work hard and book cases like this, when the cases go to court, most of the revenue cases are lost due to many inherent reasons. Non-cooperation of the evaders in furnishing documents, request interference of vested interests, collusion of some officers, consultants and others, delaying adjudication processes at different levels, improper presentation or lack of evidences and so on. Thus, in spite of the works of honest officers, cases are lost. Therefore, the involved should have some ethics, conscience and patriotism, so that the Indian society could be saved.

© Vedaprakash


UPDATED: NOVEMBER 14, 2018 23:35 IST

[1] CNN-News18, Rs 1,200 Crore Fake GST InvoiceScam Busted in Karnataka,Stacy Pereira | , Updated:November 15, 2018, 6:39 PM IST


[3] TaxScan, GST Dept unearths Rs. 200 Cr Fraud in Bengaluru, 3 Arrested, November 15, 2018 7:48 am| By : Tax Scan Team.


[5] The Hindu, GST fraud: Of 20 fake companies and one computer that generated fake bills, BENGALURU , NOVEMBER 14, 2018 23:35 IST, UPDATED: NOVEMBER 14, 2018 23:35 IST.


[7] Financial Express, GST Bengaluru division busts fake invoice racket, By: FE Bureau | Published: November 16, 2018 2:45 AM


[9] Deccan Herald, Rs 1,200 Crore GST frsud Busted in Benhaluru, Furquan Moharkan, DH News Service, Bengaluru, NOV 14 2018, 21:29PM IST, UPDATED: NOV 15 2018, 07:25AM IST



GST Council Meeting clears drafts of 3 enabling bills including compensation for states: Next meeting on January 3 and 4, 2017.

December 29, 2016

GST Council Meeting clears drafts of 3 enabling bills including compensation for states: Next meeting on January 3 and 4, 2017.


Goods and Service Tax Act, 2016 provisions – almost approved by the GST Council: The seventh GST Council meeting was held on 22-12-2016 [Thursday] and 23-12-2016 [Friday] at New Delhi, as usual. On 22-12-2016, [Thursday], the Council had finalised the Central Goods and Service Tax (CGST) clauses. CGST, is one of the three categories under Goods and Service Tax (CGST, IGST and SGST) with a concept of one tax one nation[1]. CGST falls under Central Goods and Service Tax Act 2016. As many as 20 chapters of the model GST law cleared in its last meeting earlier this month. All other provisions of the draft model GST Bill and compensation Bill were cleared[2]. To a query that industry wants more time to prepare for GST, Jaitley said, “That we will decide once we cross all bridges. I am not going to bind myself with anything. Our effort is to do it as quickly as possible. And I think we are making a reasonable headway….. The CGST and SGST laws, a total of 197 provisions and five schedules, have been approved.” The Council approved the draft model GST Bill, except for provisions relating to administrative turf[3]. The bill was passed by the Rajya Sabha on 3 August 2016, and the amended bill was passed by the Lok Sabha on 8 August 2016. In other words, the opposition parties have been dragging the issues for more than four months.

gst-consensus-is-not-yet-reached-21-11-2016-business-standardGST Council keeps dual control for next time: The politicization of the GST is evealed more in the continuing of GST Coulncil meetings that go on discuss the same issues again and again without reaching any consensus. The tricky issues of division of administrative turf over assessees between the Centre and states — which can make or break the roll-out of the goods and services tax (GST) on April 1, 2017 — was not taken up by the GST Council during its two-day meeting that ended 23-12-2016 [Friday][4]. In spite of the last six meetings, if this was not possible, it is intruguing what they were discussing every time. The next meeting of the Council, on January 3 and 4, 2017[5] would try to resolve the issue of dividing the administrative powers between the Centre and states, but signals given by state governments on Friday suggest that it would be a difficult task. The meeting would also take up the Integrated GST (IGST) Bill[6]. “That leaves us with the very important work of IGST law and cross-empowerment,” Union Finance Minister Arun Jaitley told reporters after the meeting on Friday. A state finance minister said states were clear there should be no dual control over assessees with up to Rs 1.5 crore annual turnover[7]. This means that states want sole control till this limit, and share powers with the Centre over this threshold.

gst-council-makes-headway-on-bills-24-12-2016Cross-empowerment model, Territorial limits of states  and distribution of IGST: On the other hand, the Centre has been pushing for a cross-empowerment model of randomly choosing and dividing five per cent of the assessees between itself and the states, using a computer programme.  The division of administrative turf involves another issue — whether or not states can have control over assessees having inter-state businesses. This comes under the IGST Bill and the Centre is empowered to collect IGST and distribute it among states.  The issue of IGST also involves the territorial limits of states[8]. This could also turn out to be a vexed issue, if not resolved quickly. “Definition of the territory of a state itself is a matter of Constitutional interpretation. We will have to discuss it and reach a decision,” Jaitley said[9]. The Centre also wants to take 12 nautical miles[10] beyond coasts as Union territory and tax any item sold there. Coastal states are averse to this.  With the development of science and technology, the coastal activities have been incresasing on many accounts, attracting manufacture of goods with the involvement of many services. If these issues are resolved even in the next meeting, the Bills could come up in the Budget session of Parliament. When asked whether or not the GST could be rolled out from April 1, 2017, Jaitley said, “Well, I am trying my best to do that. I don’t want to hasten the process of discussion. I don’t want to delay the process of implementation. Left to myself, I would like to (implement it from April 1).”

gst-council-keeps-control-for-next-meet-bs-24-12-2016The Compensation Bill: It also decided to provide full compensation to states every two months instead of quarterly payout decided earlier for first five years of the GST roll-out. There are expectations that the total compensation would amount to Rs 50,000 crore a year, but Jaitley said there was no cap on the amount[11]. The Council had decided to levy a cess on luxury and demerit goods over and above the higher rate of 28 per cent under the proposed multi-tier GST rate structure to create a compensation fund to pay states for their revenue losses after GST rollout[12].  The States, where manufacturing activities are more again and again sress that they would be loosing much, because of the taxing on ultimate sale and therefore, they should be compensated accordingly. Compensation law has to be approved by Parliament. The GST Compensation Bill will provide a legal backing to the Centre’s accord to compensate the states to the full extent of 100% if their revenue growth rate falls below 14% in the first five years of GST roll out. The base year for calculating revenue of a state has been decided as 2015-16.  Basic draft of Compensation law was also approved[13]. Compensation law has to be approved by Parliament[14].

gst-in-last-lap-toi-graphics-04-11-2016-1Contentious issues would be decided with consensus: However, the FM indicated that there would not be voting to resolve the contentious issues; these would be settled through consensus. “It would be resolved through a deliberative way. The GST Council meets for a full day. There is discussion for hours on a single subject. There is a high standard of debate. We get alternative suggestions. We accept the best solution after listening to all proposals. We have not decided any issue through a vote or by a give-and-take policy,” he said. It will be drafted in legally vetted language.  Despite the fact that the government failed to table and pass the draft GST laws in the Winter session of Parliament, Mr Jaitley said he was trying his best to meet the government’s deadline of April 1, 2017 for the rollout of GST. “We don’t want to hasten the process of discussion,” he said[15]. “But we don’t want to delay implementation either. The GST Council meetings are all-day and issues are often discussed for hours. No decision has so far been taken by vote, all are by consensus.”

The effect of demonetization and the GST: “If there are high deposits in banks and we got higher tax receipts after demonetisation, will it be linked to GST?” Jaitley wondered.   The next meeting would also discuss the states proposals for the union Budget of 2017-18. As the ruling party and the opposition had bitter exchanges over demonetisation, a question was asked whether there would be political hurdles in the way of GST. The finance minister said: “We are living in the real world and politics is a part of the real world. At the end of the day, one has to assume that elected representatives of the Centre and states have a sense of responsibilities. So far, despite initial divergence of views, it all ends with convergence.” Ironically, 90% of the press repoting has been based on the Arun Jaitley’s “Press Meet” and therefore, much of the GST Council meeting details were not divulged and the media has been putting up pieces together to give some picture.  The passing of the GST Act is not personal to Arun Jaitley and he need not face any hurdles in implementation[16]. If at all, India has to fall in line with other countries, get FDI for economic development, the States have to cooperate, but, because of their politics, it has been delaying[17]. That they have been harping upon the same points is well noted by the industries, businessmen and common people.

© Vedaprakash



[1] Zeebusiness, GST Council finalises compensation rules; next meet on Jan 3, Updated: Fri, Dec 23, 201607:14 pm


[3] The Hindu, GST Council moves a step closer to finalising draft laws, NEW DELHI DECEMBER 23, 2016 18:58 IST;  UPDATED: DECEMBER 23, 2016 19:10 IST.UPDATED: DECEMBER 23, 2016 19:10 IST

[4] Moneycontrol, GST Council to take up dual control issue at Jan 3-4 meet, Dec 23, 2016, 09.11 PM | Source: CNBC-TV18


[6] Business Standard, GST Council keeps dual control for next time, Indivjal Dhasmana & Dilasha Seth  |  New Delhi December 24, 2016 Last Updated at 01:35 IST.


[8] DNA, GST council fails to break deadlock on dual control, next meet on Jauary 3,4, Fri, 23 Dec 2016-05:59pm , Mumbai


[10] 1 nautical mile = 1.1508 statute miles = 1.85203308 kms

[11] Indian Express, GST council meeting: Compensation Bill to see a redraft on the ‘note ban factor, By: ENS Economic Bureau | New Delhi | Published:December 24, 2016 2:25 am


[13] Doordharshan News,  GST Council clears drafts of 3 enabling bills including compensation for states, Updated on : 23-12-2016 10:55 PM

[14] – Top Story/Pages/GSTlaw.aspx


[16] Economics Times, Arun Jaitley faces few hurdles in GST implementation, ET Bureau, Updated: Dec.24, 2016, 09.29 AM IST.