Authorities said the accused had set up 15 companies with no actual business activity, nine of which were listed on Indian stock markets, causing losses to common investors.
Published Jan 29, 2025 | 5:50 PM ⚊ Updated Jan 29, 2025 | 10:27 PM
The Directorate General of GST Intelligence (DGGI), Bengaluru Zonal Unit, on Wednesday, 29 January, said that it has uncovered a ₹3,200 crore fake invoice scam following searches at over 30 locations in Bengaluru and Mumbai.
The agency has also detained two suspects in the case, while a search is on for another suspect.
In a statement, authorities said that the accused had set up 15 companies with no actual business activity.
These companies claimed to have received goods worth hundreds of crores but only issued invoices for services such as information technology support, management consultancy, and advertising. They had a large number of inward e-way bills but had not generated a single outward e-way bill.
Nine of these 15 companies were listed on Indian stock exchanges. Investigators found that the promoters engaged in circular trading of fake invoices to inflate turnover, increase share prices, sell shares at higher values, and then exit, leaving common investors at a loss.
“What happens is that these companies issue invoices among themselves. They also obtain fake invoices worth hundreds of crores from other FMCG companies. By doing this, they inflate their turnover and, based on the increased turnover, they obtain loans from banks. They then get these companies listed on the stock exchange,” a tax official told South First.
“Once listed, and after a period of circular trading, the value of the shares increases. The promoters then sell their shares and disappear with the money.”
Further investigation showed that multiple companies filed GST returns from the same IP addresses, indicating they were controlled by the same individuals. During searches, the agency found original invoices and financial documents of several companies at the premises of other firms, further establishing common control.
“We searched all the premises of the 15 companies involved and also those of the directors. Additionally, we examined the financial statements, which were available in the public domain because these companies are listed. We also interrogated the chartered accountants who signed off on the balance sheets,” said the official. “It turned out that many of the directors were merely ‘namesake’ directors, with no actual involvement. The chartered accountants admitted to signing whatever documents were sent to them.”
The official continued: “These companies have been listed and conducting this scam for the past seven to eight years. In all nine companies, the promoter holding was about 60 percent five or six years ago. Now, it’s dropped to less than 10 percent, with public holding almost 100 percent. The promoters sold off their shares as the value increased, withdrawing all their money.”
Authorities are continuing their probe to identify all those involved and recover the fraudulent input tax credit, estimated at ₹665 crore. Efforts are also underway to locate and apprehend the absconding suspect.
(Edited by Dese Gowda)
