Since the introduction of GST in 2017, a sophisticated scam has thrived, exploiting loopholes and draining thousands of crores from the exchequer every year. Despite catching hundreds of fraudsters, the masterminds remain hidden, according to a source.
The challenge lies in the complexities of enforcement across different states, cultures and languages. Investigations often hit dead ends as fraudsters operate across multiple regions, disappearing before they can be caught, explained the source.
“Every year, we shut down over 1,000 fake companies in Karnataka alone, only to see just as many reemerge,” a senior official explained. “If we don’t catch them within six months, they vanish, making it like searching for a needle in a haystack.”
But Commercial Tax Commissioner C Shikha said the department is closing in on these elusive operators.
With limited manpower, the department faces an uphill battle, as shutting down fraudulent companies is just the first step. The real masterminds require months of tracking, officials said. “Catching these companies is like arresting foot soldiers. The real culprits remain at large,” they added.
Shikha said new tactics, including biometric technology, are being deployed in a nationwide crackdown to catch fraudsters. The root of the problem is the misuse of input tax credits, allowing fake companies to rake in crores through bogus invoices before vanishing without a trace, she pointed out.
Meanwhile, Karnataka’s which has carried out a crackdown against non genuine taxpayer has identified 1,193 phantom firms since August 16, blocking Rs 300 crore in false claims, with Rs 14 crore already recovered.
This follows earlier operations in 2023 and 2022, exposing fraud worth hundreds of crores. But fraudsters continue to stay ahead by using fake IDs and shutting down operations swiftly. Tougher laws are needed to stop this ongoing drain on government revenue, officials pointed out.
