A racket of issuing fake invoices, without actual supply of goods to the tune of around Rs 440 crore resulting in fraudulent Input Tax Credit utilisation of about Rs 79 crore was busted, the Directorate General of GST Intelligence said in Chennai on Friday.
Of the three key people involved in the racket, a man was arrested and remanded to judicial custody and two others are yet to be traced, the department said.
Principal Additional Director General, Chennai Zonal Unit of DGGSTI, K Anpazhakan, in an official release here said the modus operandi involved securing the PAN and Aadhar of unsuspecting persons on the false pretext of securing a bank loan and using it to float fictitious entities and registering them under the CGST Act, 2017.
The involvement of officials of private banks in the racket by flouting several norms is being probed and further investigation is in progress, he said.
"Searches conducted at several premises revealed that most of them were found locked and admittedly no such activities were carried out there. In fact, one of the declared premises turned out to be a tea shop," he said.
Bogus entities were floated in several layers so as to create a complex network of transactions among themselves.
Such transactions include transfer of money in bank accounts to make them appear genuine so that the fake invoices reach the manufacturers who avail fraudulent ITC without receipt of goods and in this case it was metal scrap.
The contact details furnished for registration with the GST department, and related bank accounts were found to be of persons not at all connected in any manner. The bank accounts were opened by bogus entities using forged documents allegedly in connivance with the officials of private banks, the top official said.
Investigation so far revealed that the conspiracy was hatched by three people, where one had the role of creating fictitious entities and issuing fake invoices without actual supply of goods.
Another played the key role in identifying recipients of fake invoices who actually availed the ineligible fraudulent ITC. The third person was in charge of the entire day to day activities relating to the racket.
"The total fraudulent credit passed on through the bogus entities, based on preliminary estimates, works out to Rs 79 crore," the official said.