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June 26, 2020

60 GST registrations linked to Chinese Man from Wuhan found in Karnataka

by Rubina Dsouza in Compliance Law

60 GST registrations linked to Chinese Man from Wuhan found in Karnataka


Just a couple of days after 20 Indian soldiers were martyred during an hours-long brutal hand-to-hand combat in the Galwan Valley on the night of June 15, India had to brace itself for a spell of cyber-attacks from Chinese hacker groups. This led to strained relationships between the two nations. India has accused China of turning the bilateral relationship clock back to 1990s by trying to force a war-like situation along the 3,488-kilometre-long Line of Actual Control (LAC) through its aggressive military posture in East Ladakh.

Now a new issue which will fuel to the fire has emerged in Karnataka.

  1. The commercial tax officials in Bengaluru, Karnataka have found 60 GST registrations linked to a Chinese national from Wuhan
  2. Chinese goods worth Rs 4 crore were seized from an undeclared warehouse here during a raid.
  3. A total of 25,446 Chinese made electronic and Fast Moving Consumer Goods were seized from the warehouse on Old Airport Road during the recent raids.
  4. It was learnt that the Chinese national is operating the business from Wuhan City since January 2020 with the assistance of some of his agents or employees in Bengaluru.

Information Obtained during the raid:-

1.The man had obtained the premises on a lease, and over 60 registrations had been made under central and state jurisdictions of the GST Act, in the name of several persons for online trading of Chinese manufactured goods.

2. Most of the registrations were found irregular in the filing of returns and payment of  tax.

3. A majority of firms either filed nil returns or did not file returns at all.

4. The registration data showed that:-

i. 1 business was registered in 2017-18

ii. 43 in 2018-19

iii. 14 in 2019-20

iv. 2 in 2020-21

5. Most of the 60 firms were private limited companies, and 24 persons were interchangeably directors in 58 firms.

6. During the raid, neither the Chinese national nor any of the other 59 registered taxable persons were available at the premises, and none came forward to participate in the proceedings despite sufficient time being provided.

7. Multiple registrations are being taken for a better rating on E-commerce platforms.

The warehouse has been sealed, and an investigation is initiated to ascertain the genuineness of the existence of all 59 registered persons, their transactions and tax compliances.

GST mechanism pertaining to registration, collection of taxes, inspection, seizure are required to be strengthened even more now considering the current Indo-China situation. China totally and completely dominates the Indian smartphone market, Smart TV market as well as businesses across the tech industries. Consumer interest in Chinese goods has remained distant from Indo-China relations. Care has to be taken to ensure that the increasing market share by Chinese companies do not misuse the tax provisions.

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