GST Fraud Uncovered: Key Arrest In Rs 410 Crore ITC Scam

Indian authorities have arrested a key suspect in a massive Rs 410 crore GST fraud involving the generation and routing of fraudulent Input Tax Credit (ITC) across multiple states.

Illustration: Dominic Xavier/Rediff.com

IMAGE: Illustration: Dominic Xavier/Rediff.com

Key Points

Mohammed Tauqeer was arrested for his role in facilitating fake Input Tax Credit (ITC) transactions across multiple states.
The GST fraud unearthed is estimated to be worth Rs 410 crore, involving wrongful ITC of Rs 102.5 crore.
The accused and his accomplice floated bogus firms and issued fake tax invoices without actual supply of goods.
The fraudulent ITC was routed to entities in Karnataka, Andhra Pradesh, and Tamil Nadu.
The modus operandi involved frequent creation and cancellation of GST registrations and operation through multiple-layered entities.

The Commercial Taxes Department on Wednesday said it has arrested a man involved in generating and routing fraudulent ITC across multiple states and has unearthed a GST fraud worth Rs 410 crore.

In a statement, the Commercial Taxes Department said its Enforcement Wing (south zone) arrested Mohammed Tauqeer (42) when he attempted to abscond.

Details of the GST Fraud Arrest

"Mohammed Tauqeer has been arrested for his active role in floating bogus firms and facilitating large-scale fake Input Tax Credit transactions. The accused was produced before the Special Court for Economic Offences here, which remanded him to judicial custody for 14 days," the department said.

Further investigation has revealed that Mohammed Tauqeer and his accomplice, Shaik Jakeer Hussain, alias Basha, are the principal masterminds operating behind the network, it said.

It added that the duo had floated multiple bogus business entities and systematically issued fake tax invoices without actual supply of goods, thereby generating and passing fraudulent ITC to entities in Karnataka, Andhra Pradesh, and Tamil Nadu.

Modus Operandi of the Accused

The investigation has revealed that the accused routed fake ITC to various entities, including previously arrested operatives, who in turn passed it on to works contractors and traders for offsetting their tax liabilities.

This mechanism enabled beneficiaries to discharge tax liabilities through ineligible ITC instead of cash payments, causing a significant loss to the government exchequer.

"The financial magnitude attributable to this network is Rs 410 crore in fraudulent transactions involving wrongful ITC of Rs 102.5 crore," the department said.

Evasion Tactics Used in the ITC Scam

The statement said the modus operandi adopted by the accused reflects a well-structured and evolving pattern, involving frequent creation and cancellation of GST registrations within short durations, continuous changes of mobile numbers and bank accounts, operation through multiple-layered entities, and functioning in isolated silos to evade detection.

The accused are originally from Chittoor in Andhra Pradesh, with Mohammed Tauqeer currently residing in Bengaluru and Basha operating from Andhra Pradesh.

"Despite sustained efforts over the past month, Shaik Jakeer Hussain managed to flee overseas and remains absconding," the department said.

Efforts are underway to trace and secure him through appropriate legal channels, it added.

The Goods and Services Tax (GST) is an indirect tax used in India on the supply of goods and services. Input Tax Credit (ITC) allows businesses to reduce their tax liability by claiming credit for taxes already paid on inputs. The Commercial Taxes Department is responsible for the administration and enforcement of GST regulations within the state.

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