The Directorate General of GST Intelligence (DGGI) has arrested a Delhi-based businessman for issuing fake invoices that were then used to claim input tax credits by the those who received those invoices.
Under India’s Goods and Services Tax regime, tax does not have to be paid on the same material multiple times.
In other words, when person A sells a piece of cloth to person B and pays tax, then person B does not have to pay tax on the value of the cloth when he or she makes a dress out of the cloth and sells it to person C. This is called input tax credit, as the input has already been taxed at the hands of person A.
In this case, Nitin Jain gave the credit of the taxes he paid to others so that they could lower their tax liability to that extent. It is not clear from the finance ministry statement whether Jain actually paid the taxes and fraudulently passed on the credit for others to ‘reuse’, or whether he did not even pay the tax.
“During investigation it was revealed that Nitin Jain has issued bogus invoices through his firm M/s Shiv Trade Incorporation and another firm M/s Om Trade Inexim, opened in the name of dummy person, of various types of goods namely ferrous/ non-ferrous scrap, ingots, nickel cathode etc. amounting to Rs 268.3 crores (approx).
“Through bogus invoices, Shri Nitin Jain has fraudulently passed Input Tax Credit (ITC) amounting to Rs 41.6 Crores (approx). This ITC was further availed by various entities to offset their GST liability and also passed on such fraudulent ITC to further buyers who availed the same to discharge their GST liability against their outward supplies with an ulterior motive to defraud the Government exchequer.
“During the course of investigation Shri Nitin Jain also admitted of having issued bogus invoices in lieu of certain fixed commission,” the ministry said in a statement.
He was charged under Section 132(1)(b) & (c) of the Central Goods & Services Tax Act (CGST), 2017, which are cognizable and non-bailable offences and punishable under Section 132 of the CGST Act, 2017.
Jain was arrested on 12th February, 2020 under Section 69(1) of the CGST Act, 2017 and produced before Judicial Magistrate in Gudgaon on the same day.
The court has sent him to judicial custody for 14 days. Further investigation in the matter is in progress, the ministry said.