Four men were arrested by the department of central goods and services tax and central excise (Kolkata South) for making fraudulent GST claims. They were claiming input tax credits (ITC) in the name of a network of firms that were non-existent and registered in Kolkata and Howrah on paper. GST office based in Kolkata indicated that the case cost the exchequer ₹500 Crore.
The Chief Judicial Magistrate Court of Alipore has remanded a week’s departmental custody for the mastermind, Pankaj Bagla, while the other three men have been sent to judicial custody for two weeks. It was reported that web of shell companies claimed the input tax credit for trading goods.
ITC is a tax component that a business pays while buying raw materials and the amount can then be used to reduce tax liability during the sale of the finished products. In other words, ITC can be claimed by a business that already paid GST during the purchase of the raw materials. The four arrested allegedly claimed ITC of worth ₹197 Crore from the government by creating fake invoices against fictitious business deals and supplies in the name of 86 shell companies.
A CGST official said, “Bagla, the mastermind, had been running this web for some time and defrauded the exchequer. We have sought his departmental custody. All four have been booked under Section 132 of the GST Act.” Sources familiar with the case said that an alert circular had been issued against the National Trading Company which is one of the shell firms used to route money.
All the 86 shell companies kept issuing fake GST invoices, with National Trading Company, which existed on paper, collecting ITC of worth ₹21.3 Crore. An officer said that the highest ITC of ₹101 Crore was claimed by another non-existent firm named Exacom Enterprise.