How investigation into Rs 200 Cr GST fraud in Delhi exposed underbelly of Hyd-based pharma companies

When the Director-General of GST (Intelligence), New Delhi, busted the Rs 200 Crore fake invoice scam in 2021, little did he know that the investigation into this case would expose the ugly underbelly of leading pharma companies in Telangana and Andhra Pradesh.

Vizag GST Commissionerate booked a case under section 16 (2) of the GST Act, against Hyderabad-based Rakshit drugs private limited, Virupaksha Organics Limited, and Thakur chemicals, which has moved a majority of his operations to Vizag. These three pharma companies purchased 'fake' bills worth crores from the Delhi-based company, to evade paying tax.

How did GST Vizag unravel the scam?

During the investigation, the sleuths stumbled upon a web of companies across India. Multiple central crime investigating agencies were roped in to probe into other violations like income tax evasion.

"Input credit means, companies at the time of paying taxes on the output, they can reduce the tax if already paid on inputs. Similarly, the majority of the GST fraud cases, these three companies. To avoid paying the tax portion on the output, they purchased fake Input Tax Credit (ITC) from the Delhi-based company. When in reality, there were no goods purchased," a senior officer told NewsMeter.

Sample this: Thakur Chemicals office is in Hyderabad. However, the majority of the operations are in Vizag. He purchased Rs 8 Crore worth of fake bills. While Virupaksha labs illegally bought fraudulent bills worth Rs 8 crore and Rakshith Chemicals worth Rs 4-5 Crore.

Pertinently, in order to evade arrest the companies paid the GST to the government, the officer added. However, the investigation against them is on. "To avoid the cascading effect of legal proceedings, the companies have paid the tax. Multiple agencies have been roped in to probe the web of companies located across India. Probe so far has revealed that there are close to 11-12 more companies that have purchased fake bills. This besides, other shell companies have been detected" the officer added.

Rakshit Drugs Private Limited was incorporated in 2000 in Hyderabad. The company has five directors. It is headed primarily by Anjaneya Pattabhi Rameswara Rao Chandana and Aruna Kumari Chandana. The two have served the longest term as directors. They have directorships in 11 other companies.

Located in Rangareddy, Telangana, Virupaksha Organics Limited manufactures antihistamine, anti-fungal, analgesic, antidepressant, anti-asthmatic, cough suppressant, and anti-diabetic drugs. The company has six directors. Chandra Mouliswar Reddy Gangavaram and Balasubba Reddy Mamilla are the longest-serving directors.

GST fraud cases:

According to the Finance ministry, the number of GST fraud cases booked in financial year 2020-21 are 7268 and the amount involved is Rs 31233.40 Crores. Pertinent to note that, of the total number of fraud cases, the department has been able to retrieve Rs 2231 Cr tax amount.