Goods and Services Tax (GST) authorities using data analytics have detected fraudulent refund claims of worth ₹350 Crore made by over 1,200 exporters, who are now untraceable. The revenue department has stopped the refund claims, saving the exchequer over ₹350 Crore of refunds. The department of revenue has reportedly reasons to believe that “nefarious elements amongst the customs broker community may be connected with these frauds involving fictitious entities, existing only in virtual space through identity thefts with fake and morphed documents.”
Ever since the implementation of ‘One Nation One Tax’ regime in 2017, the GST revenue mop-up has been a major issue for the government. The Central Board of Indirect Taxes and Customs (CBIC) has given the liberty to custom brokers under their licensing conditions to independently verify the KYC (know your customer) details of exporters. However, going by the cases detected in recent months, at least 50 customs brokers have been found to have dealt usually with such exporters which are untraceable at their registered addresses. Such custom brokers are also under the lens of the tax authority.
The Finance Ministry said that over 800 entities have been detected during the last five months wherein exporters had overvalued the price of merchandise worth ₹1500 Crore to fraudulently claim GST refunds. As investigators dig deeper, newer modus operandi are surfacing – a company was found fraudulently claiming refund of ₹9.88 Crore. According to the investigation, the firm was allegedly exporting readymade garments to the special economic zone (SEZ).
With the availability of newer techniques such as data analytics-based risk management, the tax officers selected the taxpayer for physical scrutiny who was then found non-existent at the declared address. Using fake invoices of over ₹847 Crore, the entity created a fraudulent credit worth ₹195 Crore and investigations lead to the discovery of untraceable suppliers. The department of revenue is using predictive modelling to carry out a risk evaluation of exporters.