22-05-2025
GST dept cancels Awadh Enterprises registration in shell company scam
Nagpur: As the crime branch of Nagpur police investigates the alleged shell company scam running into hundreds of crores, the
Goods and Services Tax
(
GST
) department has cancelled the registration of Awadh Enterprises, one of the two companies in whose name fake bills were reportedly issued.
Sources say the registration was cancelled ab initio.
The initial probe by police also shows that the invoices issued by these companies were used to claim fake input tax credit (ITC) under the GST regime.
Now, since the registration has been cancelled ab initio, all the companies that claimed ITC based on invoices by Awadh Enterprises will have to pay taxes instead, said sources. This is because, since the registration was cancelled from the beginning, even the ITC claimed by other companies will stand null and void, explained a source.
ITC is a mechanism put in place in any indirect tax system to avoid cascading effect. For example: Company X makes furniture by buying raw wood from Company Y. The tax component paid by Company X at the time of purchasing wood as an input from Company Y for making furniture will be proportionately reduced in the former's GST liability on selling furniture. This is because tax on raw wood, which is the input, is already paid.
This is known as ITC, which can be used to adjust final GST liability.
However, often fake purchase bills are issued to claim ITC fraudulently. This is done by giving a cut to the entity that issues the bills, explained the source. Now, with Awadh Enterprises' registration gone, the department will be recovering tax from an array of entities who had claimed ITC. The issue was flagged off by the state GST department to its counterparts at the Centre, which has cancelled the registration.
Awadh Enterprises comes under the state GST department's Kalmeshwar range. However, the registration details of the other company — Kshitij Enterprises — are not available with the state GST department. The crime branch, which is investigating the case, is yet to send an intimation from its side, said sources.
The investigation into the tax fraud and determination of the tax liability can only be done either by the state or central GST department. However, it is learned that neither of the departments has yet received any communication from the police. It is expected in due course because the tax aspect can only be probed by the GST department, while the police can investigate the fraud, said sources.
