Karnataka Men Arrested for First GST Fraud in the State

For the first time, a Criminal case has been registered under Goods & Services Tax(GST) in Karnataka. Two men from Bengaluru have allegedly committed fraud by raising fake invoices without paying any GST.

Two businessmen named Hameed Rizwan Parthipady Ismail, proprietor of ARS Enterprises in Mathikere, dealing in ferrous and non-ferrous scrap and Jeetendra Kantilal Gandhi who owns Ganndhi Iron & Steel company in Kalasipalyam are the accused who used fake invoices to collect 8.16 Crore in the form of Input Tax Credit(ITC). Input Tax Credit is the credit manufacturer’s receive for paying input taxes towards inputs used in the manufacture of products.

During the investigation, it was found that the accused had availed ITC without selling any goods or services to anyone and without anyone paying the GST. The two have been remanded in judicial custody by the Economic Offences Court in Bengaluru. It is the first criminal case related to GST in Karnataka.

The fraud came to light after the GST department’s data analytics software (GSTPro) hinted on suspicious transactions involving ARS Enterprises. The department arrested Ismail after physical inspection of his business area. After recording the sale/purchase transactions, it was found that Ismail, as well as a number of his customers, claimed ITC from the department. Gandhi was found to be one of the customers.

This case has highlighted that data-based intelligence is key to ensuring a higher degree of compliance.

Reference Links

  1. First criminal case registered under GST in Karnataka, two held
  2. First criminal case registered under GST in Karnataka, two held 

    Glossary: Input Tax Credit (ITC): Input Tax Credit means reducing the taxes paid on inputs from taxes to be paid on output. When any supply of services or goods is supplied to a taxable person, the GST charged is known as Input Tax.

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