Over 12 firms registered on fake addresses siphoned off Rs 12 crore input tax credit

Officials of the Central Board of Excise and Customs, Department of Revenue, have found over dozen firms, registered on fake addresses in the city. These firms have siphoned off over Rs 12 crore input tax credit (ITC). The government has blocked their input tax credit in order to deny further release of funds.

Bogus bills generated

As per modus operandi of the tax mafia, first a firm is registered on a fake address. After registration, the tax mafia generates bogus bills on the firm’s name. This means that no goods are bought or sold, but bills are generated. The liability is avoided by adjusting bogus income tax credit against the tax due on the basis of bogus bills. Bogus bills are sold to genuine firms for tax evasion after taking commission.

Taking advantage of deemed (auto) approval in the GST registration, the tax mafia managed to get several fake firms registered through the portal. On tracing the firms, the Revenue Department found that their addresses were fake.

As per modus operandi of the tax mafia, first a firm is registered at a fake address. After registration, the tax mafia generates bogus bills on the firm’s name. This means that no goods are bought or sold, but bills are generated. The liability is avoided by adjusting bogus input tax credit against the tax due on the basis of bogus bills. With this, the tax liability is eliminated by circular trading among firms. Bogus bills are sold to genuine firms for tax evasion after taking commission.

Besides, the last person in the bogus billing chain takes cash refund by declaring fake exports outside the country. These fake firms have done bogus billing for over 100 companies. For instance, a company was found registered on a fake lease deed of a labourer’s house in Kot Khalsa. This particular firm had embezzled input tax credit worth Rs 1 crore. Recovery of the embezzled amount would be a tough task for the department. However, the department blocked firm’s input tax credit worth Rs 5.5 crore.

There is a suspicion that Aadhaar cards of other people have also been misused in fake firms. Not just this, to escape from the department’s net, the tax mafia has submitted document proofs from other states.

Last year, during door-to-door drive against fake and suspicious goods and service tax identification number (GSTIN) registrations, the state Excise and Taxation Department had detected 26 dealers, who were non-existent, but had illegally pocketed Rs 8.15 crore as input tax credit.

Over 23,000 GST dealers are registered in the entire division comprising Tarn Taran, Gurdaspur, Pathankot and Amritsar districts which has more than Rs 1,600 core annual GST turnover.