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Two traders arrested for Rs 50 crore IGST refund fraud

Two traders, Ajay Gopinath Mishra and Ramesh Chandra Bhatt were arrested by The Belapur Central GST Commissionerate.

The ground of arrest were fraudulently availing IGST refunds by showing the export of textile goods over Rs 350 crore and collected IGST refund of over Rs 50 crore during the period of January and May which was refunded by the custom department on the exports made by the traders.

Later on, one of the official said that “The IGST was paid using input tax credit (ITC) which has been found to be fraudulent,”. Fraud areas found by the exporters involve :-

  • Floating more than 50 shell companies including H.A. Creation, A.S. Fashion, Ritiesh Creations, R.D. Creation, Bamane Enterprises, which were created by using the PAN and Aadhar Cards of different suspicious persons. With the use of these suspicious documents, they were able to claim IGST refunds on exported goods.
  • Premises of dummy exporters are registered in Mumbai and Nearby of 50 proprietorship firms documents (such as purchase document, export document , cheque books signed, blank cheques etc.) were recovered from the office premises.
  • The traders also have the bank documents of all the proprietorship firms.
  • Besides the suspicious documents, the bank accounts submitted to the GST departments at the time of GST registration were also different from the bank accounts submitted for the claim of IGST refund to the Custom authorities.

A commissioner of CGST, Shrawan Kumar has made an investigation which disclosed that the bogus invoices are issued by the fictitious suppliers for claiming the ITC. This ITC was utilized for the payment of IGST on the exported goods and the refund of IGST is claimed of the same.

Furthermore, As per GST law, it is mandatory to generate E-Way bill while making supplies but no E-way bill has been generated by these fictitious suppliers for making supplies of exports to the exporters.

One official revealed that “. “No one has actually paid the IGST on which ITC was availed by the exporter. The entire IGST involved during the transactions was fraudlent ” 

To prevent the revenue loss and such type of frauds, director-general (systems) was directed by Central Board of Indirect Taxes and Customs (CBIC) to make a list of “Risky exporters” and provide the same to the custom and GST officers.

A circular was also issued on 17th June, 2019 for implementation of this mechanism which ensures the verification of the IGST payments of exported goods before refunded the IGST.

Author: Niranjan Reddy

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