500 non-existent firms claimed bogus GST refunds; two more arrested

New Delhi [India], September 19 : The Anti-Corruption Branch (ACB) of Delhi has uncovered a large-scale fraud involving around 500 non-existent firms that were conducting business activities, including the export of medicines and medical items, only on paper to claim bogus GST refunds.
According to officials, these fake firms fraudulently received GST refunds worth approximately Rs 54 crore. Additionally, forged invoices amounting to around Rs 718 crore have surfaced.
Glaring procedural lapses and malpractices on the part of the GST Officer (GSTO), which resulted in a huge loss to the government exchequer, they pointed out.
As part of the ongoing investigation, the ACB on Thursday claimed to have arrested two employees (an accountant and a chartered accountant) of the primary accused running these fake firms.
The arrested persons are accused of being major recipients of the fake GST refunds and were closely involved in facilitating the fraudulent claims, they said.
In the first phase of arrests on August 12, 2024, the ACB had arrested a GSTO, three advocates running fake firms, two transporters, and a proprietor of fake firms.
"The GSTO, while conspiring criminally with the owners of these 96 bogus firms, had sanctioned Rs. 35.51 crores in 2021-22 by approving 404 refunds, whereas the previous year refund to these firms was only Rs. 7 lakhs. Fraudulent GST refunds totalling Rs. 54 crores have surfaced so far. These refunds were sanctioned by GSTO within 2-3 days of the filing of refund applications, clearly establishing her ulterior motive," the ACB said in a statement.
According to officials, the GSTO was performing his duties in Ward No. 6 till July 2021. On her transfer from to Ward No. 22 on 26.07.2021, suddenly 53 applied for migration from Ward No. 6 to Ward No. 22 and the requests were approved in a very short span of time by the GSTO.
Suspecting foul play, the Vigilance/GST Department sent special teams of GSTIs on 23.09.2021 for physical verification of these firms at their place of business. All these firms were found to be non-existent and non-functional during verification.
Accordingly, on 5.10.2021, a preliminary inquiry into the matter was ordered.
Based upon the outcome of the inquiry, on 06.12.2021, the matter was referred to ACB for detailed investigation and unearthing the whole scam.
Accordingly, a case under relevant sections was registered at PS ACB, Delhi.
During the investigation, it was found that fraudulent GST refunds were approved by the GSTO without verification of Input Tax Credit which is a crucial instrument in the identification of fake/bogus refund.
Input Tax Credit has been taken against fake invoices amounting to Rs. 718 crore, approx., i.e., fake firms did bogus purchasing of this amount. It also indicates that the running of the business has been shown only on documents.
Scrutiny of the bank account revealed that the GST refund amount was rotated through different accounts and finally destined to actual beneficiaries, i.e. accused advocates and their family members.
ACB had arrested a total 09 accused up to date in two phases of arrests and the further investigation to unearth the role and culpability of other GST officials, proprietors and transporters is under progress.