Karnataka: In a concerted effort smashes a large interstate carousel scam worth Rs 1,464 crore and arrests four people
Karnataka: The Enforcement Wing (South Zone) of Karnataka’s Commercial Taxes Department has uncovered and smashed a vast interstate phony invoicing cartel, dealing a serious blow to the tax fraud networks that plague India’s Goods and Services Tax (GST) system.
The syndicate, which operated in Tamil Nadu and Karnataka, planned fraudulent transactions involving a whopping Rs 1,464 crore in building materials, including steel, iron, and cement. This resulted in the incorrect claim and passing of an Input Tax Credit (ITC) worth about Rs 355 crore, all without any real movement of goods.
According to a statement released on Sunday, the innovation was made possible by the GST framework’s advanced analytics.
Investigators identified suspect billing patterns and circular ITC movements among associated firms by using their internal Non-Genuine Taxpayer (NGTP) module and IP address traces from the GST back office. According to the statement, this data-driven strategy led to a painstakingly organized enforcement operation, demonstrating how technology is transforming the battle against fiscal fraud.
Investigating further, investigators discovered a complex network of dishonesty; scammers obtained several GST registrations by utilizing fake documents, such as online-purchased stamp sheets, rental agreements, fake signatures, fake tax receipts, and fake notarial stamps. These fraudulent registrations gave rise to layers of shell corporations that produced fictitious invoices, mimicking real company while transferring illegal credits.
The firms voluntarily canceled their registrations after siphoning a significant amount of ITC, which investigators say is a new strategy to avoid audits and cover up evidence. The Enforcement Wing is investigating additional measures to close such gaps in the system as a result of this growing tendency.
A wealth of evidence, including 24 cell phones, 51 SIM cards, two pen drives, bank statements, and rubber stamps from different businesses, were found during the operation’s coordinated search and seizure operations in Bengaluru, Chennai, Vellore, and Pernampattu. The statement said that these materials offer to reveal more about the financing, activities, and cross-border tendrils of the cartel.
Four masterminds were apprehended, marking a significant milestone in interstate cooperation, with the Commercial Tax officials of Tamil Nadu playing a key role. In Pernampattu, brothers Irbaz and Nafiz Ahmed from Tamil Nadu were apprehended. They operated fraudulent companies such as Trion Traders, Wonder Traders, Royal Traders, and Galaxy Enterprises.
Revati and Eddala Pratap, who operated under the names Power Steel and Cement, P.R. Construction, S.V. Traders, and S.R.S. Cement Steel Traders, were also arrested in Bengaluru, according to the statement. Following their appearance before Bengaluru’s Special Court for Economic Offenses, all four were placed under judicial detention for a period of 14 days.