Shell Companies owned by a prominent TDP Rajya Sabha member and former Union minister are at the centre of a major GST tax evasion scam. Sujana group of companies is known to have indulged in GST fraud to the extent of Rs 1289 crores. GST officials traced the trail based on a fake invoice system through which llegal input tax credit to the extent of Rs 225 crores was availed in the last one and a half years, once GST was put in place. The massive GST fraud revolved around 8 companies of the group which are now under the GST scanner, as also that of other probe agencies. NJS Sridhar Reddy, who is a director of Bharani commodities pvt Ltd in Nagarjuna Hills of Hyderabad was arrested and remanded to Chanchalguda jail. The anti-evasion wing of GST is reported to have zeroed in on the Sujana group and are the links of eight shell companies to it. Among them are VS Ferrous enterprises, Infinity and Hindustan Steels, Bharani commodities and Sujana Universal Industries Ltd.
Interestingly, Sridhar Reddy's co-director on the Bharani Board B Krishna Reddy is also a director of Sriganga steel enterprises Ltd, which is already under investigation by the Enforcement Directorate. GST officials are probing into the system created by the companies of using fake invoices without supply of any goods and services.
The illegal input tax credit and GST returns were in turn used by these shell companies as collateral securities to borrow money from banks to the tune of more than Rs 700 crores. It is learnt that the fake invoices centered around supply of steels bars and TMT bars (only on paper). This fake trading involved hiking up the turnover as well and passing on the input tax credit to other entities within the group. In effect, all the transactions were done only on paper without any supply of goods or services on the ground. This entire fraud had been going on for more than 18 months now. The GST probe further revealed that these companies availed themselves of credit facilities without fulfilling the mandatory obligation of providing required collateral securities. This has prompted the GST officials to rope in other agencies to widen the scope of the investigation, it is learnt.
What is Input Tax?
As per GST regulations, when Goods are bought in one state and sold in another, the tax on it is already is paid by the seller. The buyer in the other state also pays GST to the trader in question. However, since the first trader had already paid tax on it, it is claimed by the buyer in the name of input tax credit (ITC) from the government. In other words, the government collects tax at a single point and the second trader gets what is known as input tax credit.
The companies which are under the GST commissionerate scanner now are owned by a prominent TDP MP and former Union minister and ran a system of paper transactions in eight shell companies by trading between them and claiming input tax credits to the extent of Rs 225 crores. They also borrowed Rs 700 crores showing these 'paper' transactions as collateral securities. It is learnt that thee companies are attempting to declare bankruptcy citing huge losses.
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