• Notification Date: 21-03-2024
• Notification No: N/A

Rs 70 crore GST Refund Scam Discovered by Commercial Tax Department

The commercial tax department has unearthed a scam of generating illegal GST refunds of around 70 crore using fake invoices. Two businessmen have been arrested and around seven tax officials are under the lens for enabling this by ignoring circulars issued, between July 2022 and November 2023 in Hyderabad Rural and Madhapur divisions.

Officials and the fake businessmen are said to have used a provision in the GST portal which allows companies to claim the difference in the GST credits between what is paid while buying raw materials and earned while selling finished products. The refunds are said to have been claimed with fake invoices for sale of talcum powder and e-bikes.

Section 53 of the State GST Act which allows the reimbursement of the excess tax paid under 12 different categories was used for the purpose. The process prescribes the different documents for each of these categories which have to be submitted online to the refund authorities. These have to be verified in the common portal i.e., GST network (GSTN).Some officials are said to have disregarded the 100 objections that the CAG had pointed out in August 2021 to similar refunds in the state earlier.

The erstwhile commissioner of commercial taxes had issued a circular in February 2022 directing the field officers to follow the procedures and verify the data in the common portal i.e., GSTN. He had also cited the circular No. 125/44 issued by the CBIC (Central Board of Indirect Taxes). Another circular was issued in March 2023 directing all joint commissioners in the field to conduct an internal audit of the refunds made earlier.

A fake maker of e-bikes allegedly claimed to have paid 18 per cent GST for spare parts bought and 13 per cent refund for bikes sold, all on paper. The difference of five per cent GST was claimed and paid by officials who failed to verify the details. Another trader claimed a refund as he claimed to have paid 28 per cent GST on cement, the raw material, and his finished goods, talcum powder, which attracted just 18 per cent GST. The products seem to have been chosen with an eye on the 10 per cent differential GST which they claimed as refund, sources said.

An official is said to have transferred the address of the firm which was being used as a front to his new place of posting to avoid being detected and to continue the illegal process. The episode came to light with the arrest of a trader who was asked to pay up the illegally gained refunds. He is said to have informed a senior official after he came out on bail. Internal audits of refunds, sources say, are not being done despite being mandatory. A probe has been ordered into the entire episode by commissioner T.K. Sridevi.