The first arrest in the Nagpur region covering areas Vidarbha, Marathwada, Nashik and Khandesh was made by The Directorate General of GST Intelligence (DGGSTI) made on Monday.
The person arrested is Pawan Lal, an accountant in M/s New Age False Ceiling Pvt Limited located at Kalmeshwara and a company director, Manoj Gupta, is at large. Further the search is on.
The case involves a larger probe into an alleged scam of issuing fake invoices to the tune of over Rs 600 crore in all, enabling businesses across the country to claim wrongful input tax credit (ITC) from the GST liability.
Fraudulent ITC amounting to Rs 4.63 crore based on 133 fake invoices have been taken by the company.
400 arrests have been made throughout the country in similar cases so far. The taxmen have come across a number of cases of wrongful ITC being claimed by assessees on the basis of fake purchase invoices.
The process of fraudulent ITC moves on as the company that issues such invoices records the transactions as sale in its GSTR-1 returns. The other firm records it as purchase of inputs and claims ITC for tax paid on purchases. Since the company that issues fake invoices also records it in its GST returns as sale, it further claims ITC by getting fake invoices from elsewhere.
Across a couple of companies at Mumbai were only engaged in issuing fake purchases invoices for others to claim ITC.
In this case, a circuitous transaction was found between the Mumbai companies and firms to which the invoices were issued. The same firms were found to have later sold back the material after some value addition to the Mumbai companies, enabling them to avail ITC. However, transactions from both ends were found to be fake, said sources.