GST scam worth Rs 3,200 crore uncovered in Bangalore

An alarming tax deception scheme totaling Rs 3,200 crore was recently exposed by officials from the Directorate General of GST Intelligence (DGGI) in Bengaluru. This elaborate scam involved the utilization of 15 shell companies, with investigations revealing that these entities were merely existing on paper, having no legitimate business operations despite appearances of authenticity.

The perpetrators of this fraudulent scheme orchestrated an intricate web of fake invoices, generating significant transactions for services such as IT support, management consultancy, and advertising. However, upon closer scrutiny, the presence of multiple inward e-way bills without corresponding outward e-way bills raised suspicions among authorities, leading to a thorough investigation.

Two primary aspects of this deceitful scheme were identified by investigators. Initially, a Rs 665 crore scam involving fake input tax credits (ITC) allowed the companies to falsely claim tax refunds without conducting any tangible business activities. Secondly, a more comprehensive Rs 3,200 crore fake invoice scam emerged, where the accused manipulated financial records to inflate turnover and deceive stakeholders, thereby engaging in market manipulation.

Interestingly, nine out of the 15 shell companies implicated in this scandal were listed on Indian stock exchanges. Promoters of these fraudulent entities engaged in circular trading, issuing invoices among themselves and obtaining fake invoices from other companies, including FMCG firms, to artificially inflate turnover. This strategy enabled the companies to secure loans from financial institutions and enhance their stock value, resulting in the eventual cashing out of the promoters at elevated share prices, while common investors suffered substantial losses.

Further investigation revealed that these fake firms were controlled centrally, with multiple companies filing GST returns from the same IP addresses. Moreover, the directors of these companies served as mere figureheads, while inadequacies in auditing practices by chartered accountants allowed for this elaborate deception to persist over nearly eight years.

As authorities delve deeper into this complex scam, efforts are underway to identify all individuals involved and recover the fraudulent ITC claims. Authorities are resolute in pursuing legal action against those responsible for this extensive financial deception to ensure that justice prevails and all perpetrators face the consequences of their actions.