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The Anti-Corruption Branch (ACB) of Delhi had exposed a major scam involving around 500 fraudulent firms. These companies existed only on paper and were engaged in fake business activities such as the export of medicines and medical supplies. The sole purpose of these operations was to claim false Goods and Services Tax (GST) refunds. According to official reports, these firms successfully managed to pocket approximately Rs 54 crore in fake GST refunds. Additionally, forged invoices worth a staggering Rs 718 crore have been revealed indicating the vast scale of the fraudulent activities.
Role of the GST Officer and Procedural Lapses
The involvement of a Goods and Services Tax Officer (GSTO) in this scheme has raised serious concerns. There were obvious procedural failures and unethical practices by this officer, which allowed the fraudulent refunds to proceed unchecked. These lapses have caused a significant financial loss to the government’s treasury. Officials have pointed out that the GSTO’s actions played a key role in facilitating the fraud, stressing the deep-rooted issues within the system that allowed such malpractices to thrive.
Arrests and Ongoing Investigation
As part of the ongoing investigation, the ACB has made progress in arresting key individuals involved in the scam. Two employees, one an accountant and the other a chartered accountant were apprehended. These individuals were closely connected to the main accused and are believed to have been heavily involved in securing the bogus GST refunds. Their arrests mark a significant step forward in uncovering the full extent of the fraud.
The first set of arrests took place earlier, on August 12, 2024. In that phase, the ACB arrested several individuals including a GST officer, three advocates linked to fake companies, two transporters and an owner running one of these fake firms. The involvement of such a wide range of professionals emphasizes the complex nature of the operation.
Details of the Fraudulent Refund Process
The scale of the fraud becomes even clearer when examining the actions of the GSTO. Between 2021 and 2022, this officer approved refunds worth Rs 35.51 crore for 96 fake companies through 404 individual refund claims. Comparatively, the previous year’s refund for these firms amounted to just Rs 7 lakhs making the sudden increase highly suspicious. These refunds were sanctioned within just two to three days of the refund applications being submitted, signalling clear malpractice and an ulterior motive on the part of the officer involved.
Suspicious Transfers and Verifications
The suspicious activities did not stop there. The GSTO had been serving in Ward No. 6 until July 2021. Following her transfer to Ward No. 22 on July 26, 2021, a notable shift occurred. Suddenly, 53 firms applied for migration from Ward No. 6 to Ward No. 22, and these requests were quickly approved by the GSTO. The rapid approval of these requests raised further suspicion among officials.
In light of these questionable actions, the Vigilance and GST Department initiated a special investigation. On September 23, 2021, teams of GST Inspectors (GSTIs) were sent to physically verify the firms in question. The findings were shocking—every one of these firms was discovered to be non-existent and non-operational, confirming the fraudulent nature of their business activities.
A Wake-Up Call for Oversight and Transparency
This large-scale fraud has shed light on the critical need for better oversight and transparency within the GST system. The involvement of government officials in enabling such schemes not only causes financial losses to the treasury but also undermines public trust in the system. Moving forward, stricter verification procedures must be implemented and those responsible must be held accountable to prevent such frauds from getting repeated. The ACB’s investigation is ongoing and more arrests and revelations are expected as the case unfolds.
Preliminary inquiry and investigation into GST Fraud
On October 5, 2021, authorities initiated a preliminary inquiry into a significant matter concerning fraudulent activities related to Goods and Services Tax (GST) refunds. This inquiry aimed to gather initial information and assess the situation before proceeding further.
Referral for Detailed Investigation
Following the preliminary inquiry, the findings prompted a referral to the Anti-Corruption Bureau (ACB) on December 6, 2021. This referral was crucial for conducting a comprehensive investigation to uncover the full extent of the scam. As a result, a formal case was registered at the ACB police station in Delhi under the relevant legal sections.
Discovery of Fraudulent Activities
During the investigation, it became evident that fraudulent GST refunds had been approved by GST officers without proper verification of the Input Tax Credit (ITC). ITC is an essential tool used to identify fraudulent or bogus refunds. The investigation revealed that fake invoices had been issued by allowing these fraudulent firms to claim Input Tax Credits amounting to approximately ₹718 crore. Essentially, these companies were engaged in false transactions, showing business activities solely on paper without any genuine operations.
Financial Manipulation and Arrests
A closer examination of bank accounts revealed that the GST refund amounts were being transferred through multiple accounts. This complex web of transactions ultimately led to the actual beneficiaries which included accused lawyers and their family members.
As part of this ongoing investigation, the ACB has arrested a total of nine individuals in two separate phases. The investigation continues as authorities work to uncover the involvement and responsibility of additional GST officials, business owners, and transporters linked to this fraudulent scheme. This case highlights serious lapses in misunderstanding within the GST system and emphasizes the need for rigorous checks to prevent such scams in the future.
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