The Enforcement Wing (South Zone) of Karnataka Commercial Taxes Department has caught a large syndicate involved in an interstate fake billing racket of Rs 1,464 crore. According to the government officials, the syndicate was involved in large-scale tax evasion by showing fictitious trade records of cement, iron, steel and other construction materials used across Karnataka and Tamil Nadu. According to a report by NDTV, agencies so far have found traces of nearly Rs 355 crore through the wrongful use of input tax credit (ITC). 

How Did The Scam Come To Limelight?

The fraud was detected through the use of sophisticated GST data analytics and the department’s in-house Non-Genuine Taxpayers (NGTP) system. The government found unusual billing behaviour and circular patterns of input tax credit claims through a detailed analysis of the GST data and IP address trails of the companies. Acting on these inputs, the department launched coordinated search and seizure operations across multiple locations in Karnataka and Tamil Nadu.

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The investigation revealed that the accused obtained multiple GST registrations using forged documents such as stamp papers purchased online, fake rental agreements, forged signatures of landlords and tenants, fabricated tax receipts, and bogus notary attestations. Using these shell companies, counterfeit invoices were generated, and circular transactions were shown to fraudulently claim ITC. After availing substantial tax benefits, the firms cancelled their GST registrations to evade audit trails.

The Enforcement Wing conducted simultaneous raids in Bengaluru, Chennai, Vellore, and Pernampattu, during which 24 mobile phones, 51 SIM cards, two pen drives, several bank statements, and seals of dozens of companies were seized. Officials believe these materials will provide vital evidence related to the racket's network and money trail involved.

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Police Arrest Four Culprits, Sent To Judicial Custody 

The ED has so far arrested four main culprits related to the case, including two brothers from Tamil Nadu, Irbaz Ahmed and Nafeez Ahmed. Both brothers were involved in creating fake companies like Tryon Traders, Wonder Traders, Royal Traders, and Galaxy Enterprises to carry out the nefarious activities.

The other two accused, Eddala Pratap and Revathi, are from Bengaluru, who created firms like Power Steel and Cement, PR Construction, SV Traders, and SRS Cement Steel Traders. The four accused were produced before the Special Court for Economic Offences in Bengaluru and sent to 14 days of judicial custody.