Authorities bust fake GST input tax credit racket in Delhi

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In the first such case in Delhi, tax authorities arrested a city-based father and son duo for issuing input tax credit invoices without supplying anything to their ‘clients’.

Under the GST regime, any company can get a reduction in the tax they have to pay if they produce receipts of raw material purchase, to the extent of tax that has already been paid on the raw material by its supplier.

In other words, if a cable manufacturer has a tax liability of Rs 100 cr, he or she can reduce that tax liability to Rs 70 cr if he or she can produce a bill a supplier that proves that he or she purchased a raw material like copper from that supplier. In such a case, the tax liability is passed on to the supplier.

In this case, the father-son duo seemed to be issuing such bills to other businesses to lower their tax liability.

The total tax saved in this case was Rs 28 cr, according to authorities.

“It is the first case of arrest in Delhi, under the new tax regime that came into force on 1st July, 2017,” they said. “Further investigations are underway and the quantum of evasion is likely to go up.”

Officers said that there could be several other “fake firms” that issue such fake bills to help their ‘clients’ reduce their GST burden.

The duo were arrested under Section 69 (1) of CGST Act on Monday, and were produced at a court in Patiala House.

It is not clear whether the ‘clients’ of the arrested people were arrested or not.

As per Section 132 of the CGST Act, both the issuance of an invoice or bill without supply of goods as well as the wrongful availment or utilization of input tax credit is a non-bailable offence if the amount involved is over Rs 5 cr.

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