A fraudulent scheme involving a rogue tax officer, a trio of lawyers, and several others led to the embezzlement of ₹ 54 crore from the Goods and Service Tax (GST) Department in Delhi.
The scam was uncovered by the Anti-Corruption Bureau (ACB) of the Delhi Government.
500 fake companies
The scheme involved a GST officer, three lawyers, two transporters, and a company owner, who created 500 fake companies and fabricated invoices worth ₹ 718 crore to claim GST refunds amounting to ₹ 54 crore.
These companies were merely paper entities, purportedly engaged in the import/export of medical goods, to facilitate the GST refunds.
Babita Sharma, the GST Officer (GSTO), was at the center of the operation, setting up 96 fake firms and approving over 400 refunds totaling ₹ 35.51 crore between 2021 and 2022. Initially, only refunds worth ₹ 7 lakh were processed, but this amount surged in the following year.
Notably, the GSTO approved these refunds within three days of filing the applications. After Ms. Sharma was transferred to Ward 22 of the GST office in 2021, over 50 firms suspiciously applied for migration from Ward 6 to Ward 22, which was quickly approved.
This unusual activity raised suspicions, prompting the GST Vigilance Department to investigate the offices of these firms, ultimately uncovering the fraud, which implicated the GST office itself.
Generated invoices worth ₹ 718 crore
The investigation revealed that the fake companies had generated invoices worth ₹ 718 crore, with all transactions being fictitious. The GSTO issued refunds without properly verifying invoices or Input Tax Credit (ITC) claims.
In the first phase, over 40 firms appeared to be supplying goods, but by the second phase, no records of these transactions existed. The investigation also found that for 15 of the companies, mandatory Aadhar Card and physical verifications were not conducted during the GST registration process.
Out of the 53 firms that migrated to Ward 22 after Ms. Babita’s transfer, 48 received GST refunds totaling ₹ 12.32 crore. The Non-Objection Certificates (NOCs) from property owners for these firms were suspiciously prepared between July 26 and July 27, 2021, just after Ms. Sharma’s transfer to Ward 22.
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How did they operate?
Further investigations revealed that the GST refunds were deposited into the bank accounts of three lawyers, Rajat, Mukesh, and Narendra Saini, as well as their family members, through multiple accounts. The ACB identified 1,000 bank accounts linked to the fake firms, their family members, and employees.
The trio operated 23 firms using a single email ID and phone numbers, with five firms sharing the same PAN number and email ID to obtain different GST registration numbers. These 23 firms issued fake invoices worth ₹ 173 crore, with seven companies involved in the medical goods sector, showing transactions worth ₹ 30 crore in their invoices.
Among those arrested were a fake firm owner, Manoj Goyal, and two transporters, Surjeet Singh and Lalit Kumar. The ACB discovered that forged e-way bills and receipts for transporting goods were created to secure GST refunds, with the transporters being paid for providing these fake documents without actually delivering any services.
