Rs 5,000 cr tax fraud detected in Punjab

Mandi Gobindgarh/Patiala, June 22
The Economic Intelligence Unit (EIU), the newly created wing of the Punjab Excise and Taxation Department (PETD), has unearthed tax evasion to the tune of nearly Rs 5,000 crore, involving Hawala and bogus dealers operating in many parts of the state. Following the groundwork of a few months, the department detected the fraud, which revealed how bogus Input Tax Credit (ITC) was claimed year after year.

Sources said bogus firms had been operating in the state for the past three years through Hawala transactions.

“The total amount could be over Rs 10,000 crore. But initial assessment points towards a fraud of nearly Rs 5,000 crore,” they stated.

“The department will soon open all such cases for scrutiny and summon these dealers and firms. The fraud is considered to be one of the biggest detected in the past many years,” they said.

Officials stated that the modus operandi of the dealers was also very precise, wherein Hawala dealers, majority of them operating from Mandi Gobindgarh and Ludhiana, would start fake firms dealing in iron and steel, yarns and other items and then issue fake bills and make unaccounted transactions. “Later, these firms in Ludhiana, Amritsar, Jalandhar and some other parts of the state would defraud the state government revenue through incorrect VAT claim of Input Tax Credit by their beneficiaries,” said a senior officer attached with the case.

Hawala entails making bogus invoices to allow a trader to claim tax credits. In this racket, a hawala operator, posing as a ‘seller’, exists only on paper and gets a cut in return.

A document of one such firm revealed while the firm was registered for iron and steel, all its past one-year billings were made in plastic scrap and acrylic. The same firm had issued cheques above Rs 25 lakh per cheque to unknown beneficiaries.

An officer of the department said earlier Punjab industrialists used this practice to compete with other states, which enjoyed the tax benefits. “Of late, this has become a flourishing trade where bogus firms are minting money and the government is losing precious taxable income,” he said.

“We conducted surveys and over 100 firms are under our lens. These firms will soon be summoned to explain their deals. As the tax amount is high, the case file will soon be sent to the Excise and Taxation Commissioner for necessary action,” said KVS Sidhu, head of the Economic Intelligence Unit.

“The fake firms have been operating for the past few years and have been changing names often”, he stated.

An officer said the defaulters were mainly dealing in fake iron and steel firms, dyes and chemicals, yarn trade, sanitary and plastic goods, food grains with private dealers and electrical goods.