The Central Goods and Services Tax (CGST) authorities have detected a scam by three shell firms which sold cotton to five firms of Ludhiana. The firms based in Ludhiana later claimed the input credit tax (ICT) to the tune of Rs 7.5 crore from the authorities. After detecting the fraud, the CGST, Hisar, reported the matter to their counterpart in Ludhiana to cancel the ICT claim of these firms. A CGST official said the man who floated the three shell firms and worked as an agent to sell off cotton worth about Rs 150 crore to Ludhiana firms was behind bars in a criminal case.
Sources said the spinning mills were in the know of the fraud being perpetrated by the agents and thus purchased raw material (cotton) from them at lower rates. So, without the tax (GST) being paid by anyone in the stream – from arhtiya to ginner to agent — these spinning mills reclaimed ICT from the government. This is a double loss to the government exchequer. One, no tax and market fee was paid for the cotton; secondly the government has to refund ICT on the basis of fake GST bills, an official stated. “Roughly, this is about Rs 500-crore scam. We do not have enough paraphernalia and staff to go after these fraudsters. These firms functioned in a tricky manner to confuse the tax authorities,” said a taxman.
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