Karnataka | Kingpin of fake Input Tax Credit generation cartel held

The Commercial Taxes Department said that the suspects were originally from Andhra Pradesh’s Chittoor.

Bengaluru: The Commercial Taxes Department has arrested the alleged kingpin of the fake Input Tax Credit (ITC) generation cartel and unearthed the fraud amounting to Rs 410 crore.

“In continuation of an earlier case involving fake invoicing activities detected across Karnataka and Tamil Nadu, further investigation has now revealed that Mohammed Tauqeer alias Mohammad and Shaik Jakeer Hussain alias Basha are the principal masterminds operating behind the scenes. The duo had floated multiple bogus business entities and were systematically issuing fake tax invoices without actual supply of goods, thereby generating and passing fraudulent ITC to entities in Karnataka, Andhra Pradesh and Tamil Nadu,” the department said.

On Wednesday, officials from Enforcement Wing (South Zone) arrested Tauqeer, 42, one of the alleged masterminds, when he attempted to abscond. “He has been arrested for his active role in floating bogus firms and facilitating large-scale fake ITC transactions. The accused has been produced before the Special Court for Economic Offences, Bengaluru, which has remanded him to judicial custody for 14 days. Efforts are underway to trace and secure the presence of the absconding accused Shaik Jakeer Hussain alias Basha through appropriate legal channels,” the department said.

The investigation revealed that the suspects routed such fake ITC to various entities, including previously arrested operatives, who, in turn, passed on the same to work with contractors and traders for offsetting their tax liabilities. This mechanism enabled beneficiaries to discharge tax liabilities through ineligible ITC instead of cash payments, causing significant loss to the exchequer, the department said.

“The financial magnitude attributable to this network is at Rs 410 crore of fraudulent transactions involving wrongful ITC of Rs 102.5 crore. The modus operandi adopted by the accused reflects a well-structured and evolving pattern, involving frequent creation and cancellation of GST registrations within short durations, continuous change of mobile numbers and bank accounts, operation through multiple-layered entities, and functioning in isolated silos to evade detection,” the department said.

The department said that the suspects were originally from Andhra Pradesh’s Chittoor. However, Tauqeer lived in Bengaluru, while Hussain continued the operations from Andhra Pradesh. Their anticipatory bail application was also rejected recently. Despite sustained efforts over the past month, Hussain managed to flee overseas and remained absconding.