Sunday, September 20, 2020
Home News Reports How GST has now helped catch a suspected bank loan fraud

How GST has now helped catch a suspected bank loan fraud

With the Nirav Modi – PNB case, bank loan frauds have attained importance. Various dubious means are used by businessmen sometimes in collusion with bankers or sometimes fooling them as well, to extract undue loans and credit facilities. It appears another such racket has been busted, but thanks to GST.

GST’s mandate is not to catch bank frauds, but the systems in place in the GST law have helped trace such a potential fraud. Today it was reported that two people were arrested by the Mumbai commissionerate of the Central Board of Excise and Customs for allegedly exchanging paper invoices without any movement of goods and claiming false input tax credit. The two accused are Sanjiv Pravin Mehta, director of Shah Brothers Ispat Pvt. Ltd, and Vinay Kumar Arya, director of V.N. Industries Pvt. Ltd.

The cause for arrest was violation of GST laws. As per the GST law, issuance of an invoice without an actual supply of goods and wrongful availing or utilisation of input tax credit can lead to arrest. In the current case, the department has alleged that Mehta and Arya, through their companies, exchanged fake invoices, without any actual goods sold. Thus they would claim credit of the “purchases” they made. While the input tax credit claimed by Mehta amounted to Rs 5.2 crore, it was Rs 2.03 crore in the case of Arya.

While more details have not been divulged, it is not too hard to imagine what was happening. Mehta’s company could have been making fake sale invoices to Arya’s company. And Arya’s company would make corresponding fake sale invoice to Mehta’s company, either directly, or via round-tripping it through various companies. The companies would then claim credit of GST paid on “purchases”. This was in violation of GST law.

- Advertisement -

But why would someone simply inflate sales? Inflating sales with fake invoices would mean higher income and correspondingly higher taxes. Investigation have apparently revealed that these invoices were being made with a “malafide intention to defraud the exchequer by opening Letters of Credit (LCs) on fake purchase transactions”. The game was simple: create fake transactions and extract credit facilities from banks based on these fake transactions.

GST has now caught them in the act. This has become possible because the clauses embedded in the GST law, mandate that for claim of any tax credits for purchases, “invoice matching” is needed and this is done on the GST portal. Thus all the transactions, including the fake invoices, are mapped on the system, with the respective GST numbers. Thus, it becomes easy to detect cases where invoices are fraudulently generated and round-tripped across the economy. The GST department has added that it was possible that similar fraud had taken place in several other companies linked to above two companies, and that the investigations are still on.

While this modus operandi has been detected as of now, using this route will become even harder in future. The GST council is expected to soon implement the “e-way bill” provisions. An e-way bill is an electronic document which needs to be generated every-time goods are moved, and has to accompany the vehicle transporting the goods. Once this comes, every sale invoice will also need an e-way bill and thus will also trace the movement of goods. The people who have been arrested probably felt that since there is no e-way bill needed as of now, they could get away with fake bills.

The above arrests signal a decisive shift in the way GST has been administered. Till now, the Government and GST department were going slow on the tax-payers, allowing them to get used to the new law. Now it appears, the department has had enough, and will slowly tighten screws on errant businesses.

  Support Us  

Whether NDTV or 'The Wire', they never have to worry about funds. In name of saving democracy, they get money from various sources. We need your support to fight them. Please contribute whatever you can afford

OpIndia Staffhttps://www.opindia.com
Staff reporter at OpIndia

Related Articles

Trending now

Is Govt doing away with MSP? PM Modi fact-checks Rahul Gandhi as he spreads misinformation and panic over agriculture Bills

Prime Minister Modi as well as other ministers took to social media to put out the facts and bust the misinformation being spread regarding MSP

China invades Nepal, constructs eight buildings in Nepalese territory: Reports

With expansionist policies in place, China has continued to invade Nepal inch by inch and constructing buildings on the captured lands.

HW News Network: The digital news outfit facing I-T probe with expenses eleven times the revenue and mysterious source of fund

While the revenue of Theo Connect that owns the HW News was just Rs 54 lakh in the year 2018-19, its expenses were Rs 3.23 crores

Watch: TMC MP Derek O’Brien heckles and attacks Deputy Chairman Harivansh as Rajya Sabha passes agriculture Bills

TMC MP Derek O'Brien on Sunday, entered the well and climbed the dais of the Rajya Sabha Deputy Chairman in an attempt to halt the proceedings of the house.

Customer orders jhatka chicken, BigBasket sends parcel with both jhatka and halal labels, refunds money

BigBasket had earlier come under fire for selling discriminatory 'halal' only products. After severe backlash, BigBasket made 'jhatka' meat available on its website.

From ‘she is a small-time actress’ to ‘you are the biggest feminist’, defence pours in for Anurag Kashyap who is accused of sexual assault

Accusing Anurag Kashyap of sexual assault, actress Payal Ghosh stated, "I went to meet him and the next day when he took me to the other room, he opened his zip and tried to force his c**k (penis) inside my vagina by opening my Salwar Kameez.

Recently Popular

‘He opened his zip and tried to force his c**k inside my vagina,’ actress Payal Ghosh accuses filmmaker Anurag Kashyap of sexual harassment

Actress Payal Ghosh has claimed that she was sexually harassed by filmmaker Anurag Kashyap and called him a hypocrite.

An eyewitness tells media that Disha Salian was gang-raped by 4 men in the party held on the eve of her death: Here are...

An eyewitness has told News Nation that Disha Salian was gang-raped by 4 men in the party which she attended on the eve of her death on June 8.

Devendra Fadnavis exposes how ABP Majha abruptly ended his interview, shares video of parallel recording he had arranged anticipating foul-play by the channel

Devendra Fadnavis had alleged that his interview was cut short midway while he was explaining centre's help to Maharashtra on GST credit

Delhi Police arrests journalist Rajeev Sharma for possessing classified defence documents, had written for Chinese mouthpiece GlobalTimes

Rajeev Sharma had written several columns for Chinese newspaper Global Times, the mouthpiece of Communist Party of China for the last several years.

From ‘she is a small-time actress’ to ‘you are the biggest feminist’, defence pours in for Anurag Kashyap who is accused of sexual assault

Accusing Anurag Kashyap of sexual assault, actress Payal Ghosh stated, "I went to meet him and the next day when he took me to the other room, he opened his zip and tried to force his c**k (penis) inside my vagina by opening my Salwar Kameez.

Fact Check: Is India going under lockdown once again from September 25?

PIB has debunked rumours on social media about the reimposition of lockdown from September 25 in the wake of Coronavirus surge.

Woman alleges gang-rape at a five-star hotel in Cannaught Place in Delhi, one arrested

The woman said that she was lured to the hotel room by the promise of loan at a very low interest rate, where she was assaulted and raped

‘Meaningless to play such a petty trick’, Chinese state media Global Times defends Rajeev Sharma, the journalist caught spying for China

Global Times has come out in support of Rajeev Sharma, who was arrested for passing sensitive information to China.

Watch: Maldives Foreign Minister speaks in Hindi to thank India for $250 million package during Coronavirus pandemic

Maldives Foreign Minister Abdulla Shahid thanked India for financial aid provided to the island nation to fight Coronavirus pandemic

AIMIM Chief Asaduddin Owaisi attends annual conference of Hamas-linked Islamic association, claims RSS was inspired by Nazis

Asaduddin Owaisi accused Bhartiya Janata Party (BJP) and the Modi government of being part of a larger movement known as Hindutva

Sudarshan News refers to programs on ‘Hindu Terror’ and ‘saffron terror’ by NDTV in its affidavit on ‘UPSC Jihad’ submitted at Supreme Court

Sudarshan News said that in programs on 'Hindu Terror', NDTV used Hindu symbols and saints in saffron clothes with Trishuls, Tilak etc

Shiv Sena, NCP dismisses CBDT investigation against Uddhav Thackeray, Aaditya Thackeray, and Supriya Sule, calls it a ‘routine exercise’

EC had asked CBDT to probe allegations of 'fake poll affidavits' against Supriya Sule, Uddhav Thackeray and Aaditya Thackeray

India-China standoff: Indian Army makes a major breakthrough, occupies 6 strategic heights along LAC

To counter India's strategic position, the Chinese regime has deployed 3000 army personnel, near Rechen la and Rezang La heights.

Is Govt doing away with MSP? PM Modi fact-checks Rahul Gandhi as he spreads misinformation and panic over agriculture Bills

Prime Minister Modi as well as other ministers took to social media to put out the facts and bust the misinformation being spread regarding MSP

Union Home Ministry tables FCRA amendment bill at the Lok Sabha, proposes to bring more transparency and accountability in the functioning of NGOs

Home ministry introduces FCRA amendment bill in Lok Sabha, several changes made in regulation of NGOs receiving foreign fund

China invades Nepal, constructs eight buildings in Nepalese territory: Reports

With expansionist policies in place, China has continued to invade Nepal inch by inch and constructing buildings on the captured lands.

Connect with us

244,181FansLike
453,888FollowersFollow
16,200SubscribersSubscribe