Mumbai: Pharma firm director arrested for Rs 158 crore GST fraud

Mumbai: The Central Goods and Services Tax (CGST) authorities recently arrested the director of Sulabh Pharmaceutical Pvt Ltd for causing Rs 158 crore revenue loss to the Government, by allegedly using bogus invoices sans receipts of goods or services to avail the Input Tax Credit (ITC), suggests recent media reports.

ITC is the credit manufacturer's received for paying input taxes towards inputs used in the manufacture of products. Similarly, a dealer is entitled to the input tax credit if he has purchased goods for resale. In other words, it allows taxpayers to claim credit for taxes paid on purchases.

On January 7, based on a tip-off, the CGST officials conducted raids in four different places including Sulabh Pharma's director, Pravinkumar Prajapati's office based in Malad.

During the raid, the officials found incriminating documents establishing GST violations. Investigations revealed that Prajapati had opened 17 firms in his name and his family members and employees. All these firms were fully or partially controlled by them. The firms would allegedly issue invoices among themselves in a circular manner and fraudulently avail inadmissible ITC. Later, only paper transactions were carried out by issuing invoices among these firms without any sale, purchase, or supply of goods or services.

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Commenting on the issue, the officials told TOI, “Prajapati had done many paper transactions without supplying goods and caused a huge loss to the exchequer.”

“This was done to inflate the turnover of Sulabh, Dhruv Wellness Ltd, and Jayesh Lifescience Pvt Ltd and fraudulently avail of inadmissible ITC, ” added the official.

It is further reported that the director indulged in such fraud practices to also obtain loans from various banks. He used the inflated turnover to convert his company Dhruv Wellness Pvt Ltd into a public limited company and artificially inflate the value of its shares, another officer told HT.