GST Fraud Investigation: ED Uncovers MNCs Benefiting from Multi-Crore Fake ITC Scheme

The Enforcement Directorate (ED) has uncovered a significant fake input tax credit (ITC) fraud involving multinational corporations. The investigation, which spans across India, revealed that these corporations benefited from illegal transactions. On Thursday, the ED conducted searches at about 10 locations in Arunachal Pradesh, as well as in Delhi, Haryana, Tamil Nadu, and Telangana.

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The ED's investigation began with a complaint against Amit Traders in Guwahati, Assam. This company was found to be non-existent at its registered address. The probe revealed fraudulent purchases and fake ITC linked to Shree Ram Enterprises. Shree Ram Enterprises allegedly availed fake ITC worth Rs 116 crore through bogus invoices amounting to nearly Rs 700 crore.

Fake ITC Fraud Uncovered

During the raids, the ED froze bank accounts, seized property documents, and recovered incriminating records. These actions exposed the systematic misuse of the GST framework through bogus invoicing and fake e-way bills. The investigation highlighted layered fund transfers as part of the fraudulent activities.

In Arunachal Pradesh, proprietors of Rainbow Enterprises and A K Enterprises confessed to obtaining fake ITC of over Rs 2 crore each without any actual goods movement. Tanor Engineering also fraudulently acquired fake ITC worth Rs 4 crore. These admissions further illustrate the widespread nature of the fraud.

Widespread Fraud Across States

In Hyderabad, Vinardh Automobiles admitted to fabricating a turnover of Rs 110 crore for financial years 2022-23 and 2023-24. The company created false records of vehicle manufacture and sales using bogus invoices. They fraudulently claimed GST refunds, which were then distributed among promoters, suppliers, and facilitators through fake e-way bills and kickbacks to officials.

In Haryana, two firms—Jai Shree Balaji Traders and Jai Shree Balaji Trading Co.—reported fictitious turnovers of Rs 87 crore and Rs 62 crore respectively. They passed on fraudulent ITC to major multinational companies, showcasing the extensive misuse of the GST system.

Dummy Entities in Delhi

In Delhi, Prisha Exim reported a turnover of Rs 200 crore in recent years. However, partners claimed limited knowledge of transactions conducted under its name. This suggests the use of dummy entities to facilitate fraudulent activities.

The ED stated that their primary investigation indicates that large MNCs received fake ITC. A detailed investigation is ongoing to uncover further details. Significant frauds were discovered during the searches, underscoring the need for stringent measures against such practices.

With inputs from PTI