The Directorate General of GST Intelligence (DGGI) is likely to ask the Institute of Chartered Accountants of India (ICAI) to take action against three chartered accountants (CAs) arrested for their alleged involvement in generating bogus bills to fraudulently avail input tax credit (ITC) under the Goods and Services Tax (GST) regime, two officials said.

The three have been arrested as part of the government’s nationwide drive against the GST frauds, the officials added requesting anonymity.

ICAI is a statutory body established under the Chartered Accountants Act for regulating chartered accountancy in the country. The Institute functions under the administrative control of the ministry of corporate affairs. The ICAI is the second largest professional body of CAs in the world.

The DGGI and the Central GST Commissionerate continued their drive against fraudsters. It has arrested 41 people, including three CAs and a Chennai-based businesswoman, as part of the drive. The three CAs are from Hyderabad and Ludhiana.

DGGI (Hyderabad) arrested one CA for his role in arranging and organising fake invoices of fictitious firms for one company that led to fraudulent claims of ITC worth Rs 27.4 crore. Another CA from Hyderabad was arrested for a similar crime resulting in fraudulent claims of ITC worth Rs 10.37 crore.

A Ludhiana-based CA was arrested for his role in creating three fake firms, through which he fraudulently availed of ITC and monetisation of ITC through refunds and bogus billing.

Using tools such as artificial intelligence and data analytics on the e-way bill portal, it could be established that these firms had a common set of ghost partners. They generated bogus bills worth Rs 158 crore, involving fake ITC of more than Rs 21 crore and monetisation of fake ITC of over Rs 5 crore through cash refund, one of officials said.

The second person, who works for DGGI, said, “With total 41 arrests of GST fraudsters so far, the agency has filed 577 cases against 2,221 identified entities in the eighth day of its drive against the GST fake invoice frauds.” Recent arrests were made in Gurugram, Nagpur, Kolkata and Mumbai, he added.

The government is also tightening the procedure for new GST registration to check frauds. “The businesses, whose owners or promoters do not have commensurate income-tax payment records, will require physical and financial verification before their companies can be given GST registration,” the first person said.

Explaining the menace, he said, fake invoices were not only issued for availing ITC fraudulently but also for activities leading to tax evasion, bank loan fraud, money laundering, and hawala transactions. “These activities have been largely carried out by non-existent or fly-by-night firms and by using a network of firms to game the system to usurp ITC on the commission basis,” he added.

These activities have been carried out, primarily, by those elements who have exploited the ease of doing business conveniences in the existing system by getting a GST registration easily and quickly. They took advantage of the liberalised norm for grant of registration in GST.

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