GST tax evasion: Offenders forge bills, receipts using names of low-income people

The goods and services tax (GST) fraudsters are tricking gullible, indigent, and impoverished people, and making them scapegoats in multi-crore transactions.

Such dealings, under the scanner of investigation agencies now, are being called the ‘benami bill trading.’

A hapless victim, a woman from Erumapatti in Wadakkancherry in Kerala, recently filed a police complaint saying her name was being used to create a GST registration.

Another man, whose income on the ration card is Rs 500 per month, was found to have ‘evaded’ Rs 10 crore in tax and a case was registered by the GST squad in Nilambur.

Investigating agencies say economic offenders are making pawns of such people who barely know anything of business. The investigations hit a dead end as it reached such people. The most any investigation agency can do is proceed against these unintended ‘offenders’ and get them incarcerated. The agencies are but at a loss to understand how to recover the lost GST income.

The High Court took cognizance of this ‘benami’ agents when one Prasanth of Kunnamkulam in Thrissur said he was not aware of a petition filed in his name seeing the release of a lorry and the consignment in it.

In recent times, the GST fraud involving plywood and veneer, centred around Perumbavoor, had also come to light.

Sources said GST evasion was on consignments of arecanut in the districts of Palakkad, Malappuram, and Thrissur. Arecanut is transported to north India and is in great demand to make pan masala and food additives.

False registration, invoice, bill

The tax evasion is done by meticulously creating a ‘benami’ GST registration and then forging the invoice and bill for each ‘transaction.’ GST registration is easy if one can furnish a PAN card. It does not require a bank guarantee, solvency certificate or any security. A month’s transaction return need to be filed only by the 20th of the subsequent month. The evaders use this time to finish a transaction and leave without trace.

The modus operandi

There are agents who find gullible people who live in abject poverty. Then, their documents are secured for a nominal amount. They often do not know why the agents need this. The phone numbers furnished would be of these individuals who have no role in the actual transactions. By the time a transaction is sealed, the actual culprits vanish. The agents then set up another ‘benami’ agent.

Initial oversight

Those familiar with the matter said the initial official oversight had cost the government dearly. In 2017, the VAT regime changed over to GST and the ensuing confusion diluted the ‘authentication’ mechanisms. This is the basis of the frauds that are being detected now.

In the switchover to GST, the online authentication of registrations was not foolproof. Physical or on-site verification was rare. The clause in the GST rule that verification should be completed in three days made matters worse. Many registrations got auto-approved as actual verifications could not be done.

Sources said thousands of ‘benami’ registrations took place in 2017-18. Initially, the traders could do more than one transaction, many of them running into crores, as the system was still in infancy. No returns were ever filed.

Now, after the initial confusion, the GST registrations are more strict and better scrutinized, sources said. Officials do physical verification wherever possible.

Kerala scenario

The Kerala GST wing would ensure that physical verifications was done to prevent ‘benami’ registrations, sources said.

The Tax Commissioner had issued a circular in this regard. The circular stated that officials should exercise extra care with businesses dealing in iron, lottery, flooring items, spices, arecanut, cardamom, and plywood.