The State Taxes and Excise Department has uncovered a complex network of tax evasion across five states, leading to an investigation into the irregularities of three firms in Kala Amb. The department has found that these firms, along with approximately 300 others, have conducted transactions worth more than 8300 crores, availing and passing on input tax credits of over Rs. 1500 crore.
The Economic Intelligence Unit (EIU) at the State Taxes and Excise headquarters launched an investigation into the network and found that these newly registered entities disclosed huge amounts of transactions in a very short span of time and then got themselves cancelled. The entities at the beginning of the supply chain never paid the tax to the government. Moreover, a significant number of entities at the beginning of the supply chain have been cancelled retrospectively by tax authorities, implying the declaration of fake paper transactions by these entities.
Further, some of the partners of these firms were previously found to be engaged in tax evasion activities, where demands were imposed by the department. The findings suggest that two entities, with the support of a third, have availed and passed on ineligible input tax credits of up to Rs. 250 crores to other taxpayers.
The department conducted an inspection of the three firms in Kala Amb with the help of around two dozen officers from three districts. The inspection found that the firms were discharging an insignificant portion of their tax liability through payment of cash, and most of their liability of tax was discharged through Input Tax Credit. The inspection also revealed that these firms had been creating a complex web of transactions to pass on fake or ineligible input tax credit.
The State Taxes and Excise Department is taking strict measures to prevent such practices and urges taxpayers to comply with the laws and regulations in force. Action against the said network will be taken as per the provisions of the GST law.
