Ludhiana ‘hub’ for fake Haryana GST bills

Ruchika M Khanna
Tribune News Service
Chandigarh, January 9

Ludhiana is fast gaining notoriety as the main market for goods bought on fake GST bills, including raw cotton bought from Haryana.

Most spinning mills in Ludhiana are buying raw cotton from ginners at lower than market rates and it becomes possible because the product has been bought illegally by ginners, without paying state taxes.

The practice, though known to all in the taxation department and those in trade, did not catch public attention till the Haryana Excise and Taxation Department blew the lid off the multi-crore scam.

Strangely, only two FIRs have been registered to date by the taxation department in Punjab as regards the fake GST bill scam by shell firms in connection with a similar practice in iron and steel industry.

“So far, we have been concentrating only on fake GST billing in iron and steel industry. Now, we will start investigating fake billing in yarn and readymade garment industry too,” said Saurabh Raj, Additional Excise and Taxation Commissioner.

A number of Ludhiana-based spinning mills have bought cotton from the ginners who bought cotton without paying mandi fees and rural development charges. Such ginners purchased fake GST bills from shell firms and used these to pass off their purchases as legal ones.

The mills in Ludhiana that bought cotton from unscrupulous ginners, knowingly or unknowingly, have claimed input tax credit (ITC) worth crores on the manufacturing of yarn and readymade garments. As a result, spinning mills and readymade garment manufacturers that use cotton as raw material are now under the scanner of taxation department.

Taxation officials said while they would be “investigating the Ludhiana-based factories that have bought cotton from Haryana”, FIRs could not be registered in Punjab as the fake bills were generated in Haryana.

Trade and industry representatives in Ludhiana, however, say, “GST has become a money-spinner for the taxation department. Instead of targeting those who are generating fake GST bills, the department is investigating manufacturers who are buying goods on these ‘fake’ bills. As soon as the investigation starts, the manufacturer, scared of attracting huge penalty, sometimes as high as 200 per cent, succumbs to pressure by the taxman.”

“Taxation department officials and some middlemen, who facilitate these deals, end up taking bribes, while the state government gets the wrongly claimed tax credit back,” alleged Badish Jindal, president of Federation of Punjab Small Industries Associations. The officials, however, deny the charge. They say their strategy is to extract maximum recovery of GST and block false input tax credit claims.

“Registering an FIR would be the end, but we are doing end-to-end investigations and recovering tax that was not paid,” said a senior officer. Saurabh Raj said they had conducted 344 inspections/search and seizure operations since the implementation of GST. “Tax and penalty recovered and the worth of vehicles impounded during such operations amounted to around Rs 87.59 crore. Claims of input tax credit worth hundreds of crores have also been blocked,” he claimed.