The Hidden GST in Indian Weddings (GST Components in Wedding Bills)Case – Maharashtra, Jalna City
CA Navin Singhal
CA Navin Singhal is a versatile professional with diverse experience in various fields, including:
– Valuation expertise in Insolvency and Bankruptcy cases as a junior valuer
– Statutory audit of listed and unlisted companies
– Stock and receivable audit
– Leadership role in internal audit teams
– GST audit for individuals and companies
His broad range of experience has equipped him with a unique understanding of various aspects of accounting, auditing, and valuation.”
The average cost of several wedding services, such as shopping, tent hire, and food services, has risen due to GST. The GST rate on most of these services ranges from 18% to 28%. Before the implementation of GST, most wedding service providers, such as tent rental and sweet vendors, used unregistered bills on which no tax was levied.
An interesting case involved tax officials disguising themselves as wedding guests to crack down on GST fraud.
A team of senior income tax officers formulated a strategy to find tax cheats in the busy metropolis of Mumbai. In a move reminiscent of a cinematic operation, the officers posed as a wedding party during the monsoon season. This carefully planned operation aimed to infiltrate companies engaged in tax fraud, rather than conduct a routine raid. The operation was scheduled for August 4, 2022.
The group traveled to Jalna City, an industrial center in Maharashtra well known for its steel and agricultural goods. Nearly 400 individuals and more than 100 automobiles and SUVs, all decked out in colourful wedding decorations, made up the enormous scale of the operation.
To make their disguise more realistic, the cars had stickers with names like “Rahul weds Anjali.” This large procession surprised the people of Jalna, particularly because it occurred during the monsoon season, which is not a typical period for weddings. The party went forward with its act despite the strange time. As if they were part of a normal wedding procession, they danced to music from Hindi and Marathi movies.
The Idea of Surprise and Privacy:
Even the local police and income tax officers in Jalna were kept in the dark to maintain confidentiality. Disguised as wedding guests, the crew split into three groups and targeted a residential house, an office, and a factory. Each group maintained its cover story, pretending to be guests at the business owner’s second wedding or part of his wedding procession. The guards were initially dubious and perplexed by a wedding celebration in such a place. But because the performance was so impressive, they were eventually allowed admission, enabling the officers to conduct the raid effectively at all targeted facilities and catch the tax evaders off guard.
The Execution: The Raid
As soon as the cops entered the building, they surprised the targets by presenting their names and raid notices. Any attempt to conceal or destroy proof of tax evasion was stopped by this prompt action. By obstructing all exits and carrying out exhaustive searches, the teams effectively secured the locations. To guarantee thorough coverage and control, a standby crew was also prepared to follow up on any fresh leads that surfaced during the operation.
The Outcome:
The secret tax raid in Jalna had a startling result. Massive sums of unreported riches, including bundles of ₹500 notes and substantial quantities of gold jewellery, were found by investigators searching the property. These assets were concealed beneath flooring, in cupboards, under beds, and even within hidden compartments. At a nearby State Bank of India branch, counting the amount of confiscated currency took fourteen hours due to its size. The officers discovered documentation revealing a network of benami properties worth ₹390 crore in addition to the hidden cash and gold. Additionally, they uncovered a confidential stock ledger that showed unreported raw supplies valued at more than ₹120 crore.
The inquiry revealed that layers of fraudulent loans and exaggerated share premiums were used by shell firms based in Kolkata to conceal this unreported income. The findings underscored the effectiveness of the meticulously planned raid and revealed a highly complex and well-organized tax evasion scheme.
Hidden GST components found in the case:
Several Goods and Services Tax (GST) components were either directly discovered or indirectly implicated in the Jalna raid. Although the Income Tax Department oversaw the raid, it exposed more widespread economic wrongdoings that frequently cross paths with GST avoidance. The GST-related elements mentioned or suggested in the case are broken down as follows:
1. Unaccounted Raw Materials (₹120 crore) –
GST Component:
Unreported raw materials suggest purchases not recorded in official books, likely made without issuing proper GST invoices. This implies:
- Input Tax Credit (ITC) fraud.
- Evasion of GST on inputs.
2. Hidden Stock Ledger –
GST Component:
A secret stock ledger shows that the company kept duplicate records to hide real turnover, hence
- Underreporting sales or outgoing supply.
- Preventing production GST obligations.
3. Shell Businesses with Inflated Share Premiums and False Loans –
GST Component (Indirect):
These fraudulent transactions are mostly an income tax problem, but they can also be used to:
- Money laundering via fake GST-registered companies.
- Create fictitious invoices, a popular technique for GST fraud.
4. Use of Benami Properties –
GST Component (Indirect):
Unregistered manufacturing or trade units may be housed on properties registered under false names:
- Resulting in the avoidance of GST registration.
- GST is not paid on products or services purchased through these units.
5. Cash Transactions –
GST Component:
Significant unexplained cash indicates sales that were not properly invoiced:
- Resulting in turnover-related GST evasion.
- Getting around e-way bills for goods transportation.
Conclusion:
Several hidden GST components usually surface in incidents like the Jalna raid, exposing intricate tax evasion tactics. By keeping confidential stock ledgers and transacting in cash without generating GST invoices, businesses frequently conceal their true turnover. This results in substantial output GST evasion. In a similar vein, unexplained purchases are made without the required paperwork, which enables businesses to either completely avoid or incorrectly claim the Input Tax Credit (ITC). Additionally, businesses operating through benami properties frequently do not register for GST at all, which makes tax evasion much easier. Another indication of non-compliance with e-way bill requirements is the unreported movement of goods.
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Sources:
How Tax Officials Disguised as Wedding Guests Cracked Down on GST Fraud? | by History Hub | Medium
