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December 27, 2020

GST Officer arrested for acquiring disproportionate assets of Rs 1.34 crore

by CA Shivam Jaiswal in GST

GST Officer arrested for acquiring disproportionate assets of Rs 1.34 crore

For the past 8-9 months the COVID 19 pandemic has forced India into a lockdown. Most of the countries small businesses which relied on physical availability of customers have had the most hit. Small business revenues have plunged everywhere. Nevertheless, tax evaders have proved to be an exception to this rule, who no matter what the situation persists, find a way to evade tax. In latest news, Telangana Anti-Corruption Bureau (ACB) unearthed assets worth about Rs 1.34 crore allegedly belonging to a deputy executive engineer working in Panchayat Raj in Nalgonda district of the state.

What led to the arrest of the GST Officer?

  • Assistant Commercial Tax and GST officer of Rourkela Circle-I Alekha Mohananda was arrested by Vigilance for amassing disproportionate assets.
  • Based on a tip-off that V Ravindranath has acquired assets disproportionate to his known sources of his income, a case was registered and simultaneous searches were conducted at his residence besides those of his relatives and associates.
  • The searches disclosed that the accused officer had acquired and was in possession of a posh ground plus three-storied residence, two residential flats, two housing plots in Shamshabad in the city, three housing plots at Bibinagar in Nalgonda district, a car, 450 grams of gold, expensive household articles and bank deposits of about Rs 5.4 lakh.
  • The GST officer’s immovable and movable property was valued at around Rs 1.34 crore of which Rs 87.98 lakh was found to be disproportionate to his known sources of income.
  • He was arrested after a case was registered against him.
  • He was taken to Sundargarh town for production in the court of Special Vigilance Judge. 
  • Vigilance sleuths had conducted raids at Mohananda’s residential building at Chhend Colony and office at Uditnagar in Rourkela and two other places in Sundargarh district.
  • Mohananda was part of a State GST enforcement team which on Monday arrested two persons here for GST fraud amounting to around Rs 42 crore by raising false purchase and sale invoices worth Rs 233 crore.

What do you mean by “Disproportionate assets”?

  • “Disproportionate assets” is a term used in India to describe a situation where an individual’s net economic assets significantly exceed the assets he or she should possess after accounting for the assets that he or she previously held and all legal sources of income.
  • Disproportionate assets cases are investigated by the CBI Central Bureau of Investigation and the Income Tax Department.
  • The concept is extensively used to initiate corruption investigations against public servants and elected politicians in India, and has been codified in several pieces of national- and state-level legislation, including the Prevention of Corruption Act, 1988.

Arrest of another for availing fraudulent ITC

  • The Central GST (Intelligence) authorities also arrested another person in connection with tax fraud on the same day.
  • He was identified as Ejaj Ahemad, aged 54 of Rourkela. Ejaj was arrested from his hiding place at Jharsuguda and brought to Rourkela. He was produced in Panposh SDJM court and sent to judicial custody.
  • Ejaj had fraudulently availed Input Tax Credit (ITC) of Rs 5.02 crore against fake invoices of around Rs 27.90 crore.
  • Similarly, he had raised fake invoices of around Rs 20 crore to fraudulently pass ITC benefits of Rs 4 crore.
  • Ejaj was involved in the Central GST fraud of Rs 40 crore by raising fake purchase and sale invoices to the tune of around Rs 262 crore.
  • On December 16, another member of the racket Santosh Gupta (45) of Rourkela was arrested by Central GST officials.
  • In some other cases, the tax department has found that promoters of certain companies have routed fake invoices through a series of shell companies and transferred input tax credit from one company to another in circular transactions to increase the turnover of the company. This helped them not only evade GST but also avail higher bank loans and credit facilities due to increased turnover.
  • In the last month, 132 persons including four chartered accountants and a woman were arrested for availing or passing on ineligible ITC fraudulently and 1,430 cases were filed against more than 4,586 fake GSTIN entities identified across the country.
  • The GST officials in November 2020, also arrested three persons involved in massive frauds involving GST amounting to over Rs 2350 crores. The Director/Partner in various firms was arrested for availing ITC amounting to Rs 485.64 crore and passing on fictitious Input Tax Credit amounting to Rs 485.55 crore. Thus, the total quantum of the fraud committed involved GST amounting to Rs 971.19 crores.
  • In a parallel investigation, another person was also found engaged in the fraudulent availment and utilization, as well as passing on of ineligible ITC on the basis of bogus invoices issued and received without actual supply of any goods or services. These entities had availed ineligible ITC amounting to Rs 580.23 Crores and had passed on ineligible ITC amounting to Rs 579.76 crores. The total quantum of the fraud committed involved a GST of nearly Rs 1,159.99 crores.
  • According to official data, in 2018-19, the central GST authorities registered 1,602 cases of fake ITC involving an amount of Rs 11,251 crore and arrested 154 people. Between April and November 2019, the authorities booked over 6,000 such cases.

What is the reason for increase in invoice fraud?

  • One of the primary reasons for an increase in companies availing ITC fraudulently is the lack of due diligence during the GST registration.
  • The process of registration was made easy and hassle free by the government so that businesses could be easily on-boarded to the system.
  • However, this meant that a number of dummy companies too obtained the GST registration in the absence of scrutiny or physical verification of the registered address of the companies.
  • Apart from this, lack of data exchange among the enforcement agencies and banks have also led to increase in fraud cases.

What are the steps taken by the Government to control such invoice frauds?

Previously, businesses used to generate invoices through various software’s, and the details of these invoices were manually uploaded in the GSTR-1 return. The invoice information was thereafter reflected in GSTR-2A for the recipients for viewing only. On the other hand, the consignor or transporters had to generate e way bill by again importing the invoices in excel or JSON manually.

The GST Council, in its 35th meeting, decided to implement a system of e-invoicing, which would be applicable to specified categories of persons. The concept of GST e-invoice generation system was taken into consideration for the reduction in GST evasion.

  • GST e-invoice is basically a digital invoice for goods and services provided by the business firm generated at the government GST portal.
  • ‘E-invoicing’ or ‘electronic invoicing’ is a system in which B2B invoices are authenticated electronically by GSTN for further use on the common GST portal.
  • Under the e-invoicing system, an identification number will be issued against every invoice by the Invoice Registration Portal (IRP) to be managed by the GST Network (GSTN).
  • All invoice information will be transferred from this portal to both the GST portal and e-way bill portal in real-time.
  • E-invoicing replaces the physical invoice and will soon replace the existing e-way bill system, and taxpayers will not have to generate separate e-way bills.

The e-invoicing process was introduced to capture sales details, reduce errors, automate data entry and improve compliance and trust between tax officials and companies. It will also help auto-populate certain forms. E-invoicing will most definitely provide a push towards a digital economy. Curbing tax evasion and increasing tax collections for the government may ensure that the government will not increase GST rates any further. The government is also planning to tighten the GST registration process and legal measures to deal with the rising cases of fake invoicing.

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