Tuesday, May 11, 2021
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.

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

After oxygen, AAP govt plays politics over availability of COVID vaccines: Here is how they are wrong

The AAP Govt has begun diverting attention from its poor vaccination efforts by shifting the goalposts

Samajwadi Party’s Covid politics: Why they want to derail the vaccination drive in Uttar Pradesh

Akhilesh Yadav sent a very irresponsible message to his followers, that this is 'BJP’s vaccine' and 'I will not take this vaccine'.

Mumbai: Woman gets vaccination certificate without getting a jab, BJP demands audit

Hinting at a scam, Mulund MLA Mihir Kotecha has demanded an audit of every vaccine given to Mumbaikars suspecting there could be more cases like hers.

Enforcement Directorate books Anil Deshmukh under anti-money laundering law, to probe financial dealings: Details

The case by ED against Anil Deshmukh was made out based on the details of the corruption case filed by the CBI on April 24.

NCP supremo Sharad Pawar believes he committed a big mistake by making Uddhav Thackeray the CM of Maharashtra: Report

A report published in Marathi daily Tarun Bharat said that Sharad Pawar conveyed to Sanjay Raut that he made a big mistake by making Uddhav Thackeray the chief minister of Maharashtra.

Sanjay Raut approaches court to ask Twitter to take down tweets accusing him of harassing Marathi film producer Swapna Patker

In his complaint, Raut claimed that the Tweets made on him are misleading and could “harm the peace and harmony” of the country.

Recently Popular

As Netizens trend #ArrestMunmunDutta, the actor apologises, says she was misinformed and did not intend to use casteist slur: Details

Actor Munmun Dutta, most famously known for playing the character of 'Babita Ji in 'Taarak Mehta ka Ooltah Chasmah', today posted a statement on Twitter, apologising

BMC chief explains why it is not the Modi govt but the states that need to be blamed for the oxygen crisis

BMC chief said that mismanagement of states is responsible for the oxygen crisis and increased number of SOS calls

Israel spy agency Mossad’s parody account pokes fun at Bollywood entertainer Swara Bhasker over her ‘#FreePalestine’ campaign

Swara Bhasker had posted a tweet calling Israel apartheid and terrorist state following the clashes at the Al Aqsa Mosque in Jerusalem

Iran: 20 year old youth Alireza Fazeli Monfared beheaded by half brother, cousins for being gay

Alireza Fazeli Monfared, a 20 year old Iranian youth, was murdered by his brother and cousins due to his sexual orientation.

Cartoonist gets Twitter notice for a caricature of Maharashtra CM Uddhav Thackeray: Details

The cartoonist took to Twitter to share the copy of the notice he received from the legal department of the microblogging website.

NCP supremo Sharad Pawar believes he committed a big mistake by making Uddhav Thackeray the CM of Maharashtra: Report

A report published in Marathi daily Tarun Bharat said that Sharad Pawar conveyed to Sanjay Raut that he made a big mistake by making Uddhav Thackeray the chief minister of Maharashtra.
- Advertisement -

 

Connect with us

254,922FansLike
541,572FollowersFollow
24,300SubscribersSubscribe