The Directorate General of GST Intelligence (DGGI) based in Ahmedabad zonal unit has detected a fake invoice scam of over ₹1000 Crore involving multiple units at the Kandla Special Economic Zone (SEZ) at Gandhidham. Companies were found claiming the input tax credit (ITC) by inflating the value of goods by as much as 4000% against the export of sin goods.
After receiving specific intelligence that a few units in Kandla SEZ, aided by 20 exporter firms based in the National Capital Region (NCR), were committing fraud, tax officials conducted searches in three units in the SEZ and the premises of some NCR-based exporters and unearthed the scam. Additional Director General Vivek Prasad said, “The modus operandi detected indicates huge overvaluation to the extent of 3000-4000% of the market value of goods exported to the SEZ and claiming input tax credit refund fraudulently.”
Input tax is paid by a business when purchasing goods and services which go into its own products or services. It is then claimed as a credit after making a sale which also lowers its tax liability.
According to a statement released by DGGI, the entities had conspired wherein the products selected for carrying out the fraud were low-grade material such as scented zarda, tobacco extracts, filter khaini, etc. which are subject to tax at the rate of 93% and 188%, including cess. The goods were manufactured by a few Noida-based units or procured locally at the rate of ₹150-350 per kg, which was then exported to SEZ-based units at the rate of ₹5000-9000 per kg.
The statement also added that the exporters subsequently claimed a refund of accumulated ITC, sourced fraudulently, in excess of ₹400 Crore from the jurisdictional GST authorities. The agency has identified more than 25 suppliers located in states like Delhi, Haryana, Assam, Bihar, Madhya Pradesh, and Uttar Pradesh who have issued fake invoices worth more than ₹1000 Crore to the NCR-based exporters without the supply of goods to facilitate refunds.