The Enforcement Directorate (ED) on Friday said its preliminary investigation into a multi-crore, pan-India fake ITC racket has revealed that several multinational corporations (MNCs) benefited from these fraudulent transactions.
The ED's Itanagar office, along with its teams across Delhi, Haryana, Tamil Nadu and Telangana, conducted searches on about 10 premises on Thursday as part of the probe registered under the Prevention of Money Laundering Act (PMLA). The searches led to freezing of bank accounts, seizure of immovable property documents, and recovery of incriminating records, exposing large-scale misuse of the GST system.
Fake ITC Scam: The Modus Operandi
The case originated from a complaint against Amit Traders, a Guwahati-based firm that was found to be non-existent at its declared address. Investigations linked it to Shree Ram Enterprises, which allegedly availed fake ITC of about Rs 116 crore on bogus invoices worth nearly Rs 700 crore.
The ED said its probe uncovered widespread use of bogus invoicing, fake e-way bills, and layered fund transfers to siphon off illicit gains. "Primary investigation reveals that fake ITC has been passed to big MNCs for which a detailed investigation is going on," the agency stated.
Key Findings from ED Searches
- Arunachal Pradesh: Proprietors of Rainbow Enterprises and A K Enterprises admitted to availing fake ITC of over Rs 2 crore each without any supply or movement of goods. Tanor Engineering was also found to have fraudulently claimed ITC of Rs 4 crore.
- Hyderabad: Vinardh Automobiles admitted to fabricating a turnover of Rs 110 crore between FY 2022-23 and FY 2023-24 through bogus invoices and fake e-way bills, fraudulently claiming GST refunds siphoned off among promoters, suppliers and facilitators.
- Haryana: Jai Shree Balaji Traders and Jai Shree Balaji Trading Co. showed fictitious turnovers of Rs 87 crore and Rs 62 crore respectively, passing on fraudulent ITC to leading MNCs.
- Delhi: Prisha Exim reported a turnover of Rs 200 crore in recent years, but its partners claimed little knowledge of the transactions, suggesting the use of dummy entities.
Industry-Wide Impact
Tax experts say the findings underline a systemic challenge in curbing GST frauds through dummy firms and fabricated invoices. The ED's assertion that large MNCs benefited from these fraudulent credits highlights the scale of misuse within supply chains.
The agency has termed the frauds "significant" and said further investigation is underway to establish the role of beneficiaries and facilitators.
CAclubindia
