In a significant move against tax evasion, the Enforcement Directorate (ED) on Thursday launched a major crackdown on a massive Goods and Services Tax (GST) frThe Enforcement Directorate (ED) launched a major crackdown on Thursday, targeting a massive 800 Crore GST Fraud. ED officials raided nine locations across Jharkhand and West Bengal as part of an ongoing investigation into fake Input Tax Credit (ITC) claims.
Raids and Locations
ED teams conducted raids at:
- Four sites in Jharkhand, including three in Ranchi and one in Jamshedpur
- Five locations in West Bengal
To maintain law and order during the raids, the agency deployed Central Reserve Police Force (CRPF) personnel.
How the 800 Crore GST Fraud Worked
A group of businessmen created shell companies that existed only on paper. They generated fake GST invoices worth more than ₹14,325 crore to falsely claim ITC. After securing these benefits, they shut down the fake firms to escape legal scrutiny.
How GST Fraud Using Fake ITC Works
Fraudsters often exploit loopholes in the GST system by creating fake companies and bogus invoices to illegally claim Input Tax Credit (ITC), which reduces their tax liability. Here’s how the scam typically works:
Step-by-Step Breakdown
- Create Shell Companies
- Fraudsters register multiple fake or shell companies with GST numbers.
- These companies exist only on paper and do not conduct any real business.
- Generate Fake Invoices
- They create fake purchase and sales invoices showing the sale or purchase of goods/services that never actually occurred.
- These invoices often show high-value transactions involving GST.
- Claim Input Tax Credit (ITC)
- Based on the fake invoices, these companies claim ITC from the government.
- For example, if a company shows it bought goods worth ₹10 crore with ₹1.8 crore GST, it claims that ₹1.8 crore as tax credit.
- Pass on the Fake Credit
- They often sell this fake ITC to other real businesses at a commission.
- The real businesses use this ITC to reduce their own tax liability illegally.
- Close the Fake Companies
- After claiming and distributing the ITC, the fraudsters shut down the shell firms to avoid detection.
- They then start new shell companies and repeat the process.
Why It’s Dangerous
- The government loses massive revenue.
- It distorts fair business practices.
- It increases compliance pressure on honest taxpayers.
Key Suspects
The ED identified several individuals involved in the 800 Crore GST Fraud including:
- Shivkumar Deora
- Sumit Gupta
- Amit Gupta
During the raids, ED officials seized important documents that could serve as critical evidence. Investigators are now reviewing the materials to uncover more links and assess the scam’s full scale.
Past Fraud Discoveries
In earlier investigations, the GST Directorate had already exposed similar scams in Jharkhand:
- A ₹100 crore fake invoice case in Sarubdera (Ramgarh) and Jharia (Dhanbad)
- A ₹150 crore fraud in Jamshedpur and the Adityapur industrial area
Although ED carried out operations in West Bengal last year, this marks the first major action in Jharkhand under the current investigation.
What’s Next?
The ED has not yet released an official statement. However, investigators plan to disclose more details after they complete the review of seized evidence.
