Fake firms pass on Input Tax Credit of GST to outside entities
Shillong, Sep 11: The state government has launched an investigation into fake firms engaged in manipulation of Goods and Services Tax (GST) in nexus with entities outside the state.
Informing this in the Assembly, Taxation Minister Abu Taher Mondal on Thursday said, “GST department is actively investigating fake firms operating within Meghalaya which are engaged in passing on Input Tax Credit (ITC) to recipients located outside the state.”
“Findings of such investigations are shared with respective state authorities so that coordinated action can be taken against the fraudulent entities,” he said in reply to a query from VPP MLA Ardent M Basaiawmoit, who highlighted alleged Rs 500-crore GST fraud involving coke plants in Meghalaya.
The minister said GST Department has requested Directorate General of GST Intelligence (DGGI) to share such information so that necessary action can be initiated against the recipients of bogus ITC under the state’s jurisdiction.
He also assured that action has been taken against fraud cases regularly communicated by agencies such as DGGI to state authorities.
As per a report, four Assam residents – Gaurav Agarwal, Deepak Agarwal, Vinod Agarwal, and Guddu Singh – were arrested on August 20, 2025 for their involvement in a fake billing scam. Another person, Shiv Kumar Mittal, owner of GM Coke Plant at Byrnihat under Assam’s jurisdiction, was arrested for allegedly evading GST amounting to approximately Rs 150-200 crore through similar schemes.
Mondal, however, said the DGGI has not yet disclosed details to state GST department as to which coke plants in Meghalaya were benefited from such fraudulent schemes.
He pointed out that legally sourced coal within Meghalaya has been limited ever since the National Green Tribunal (NGT) banned rat-hole mining in 2014. As a result, coke plants rely mainly on coal obtained through district administration auctions, and to meet their full requirements, they also procure coal from outside the state.
ITC is a key feature of the GST framework, as it allows recipients to reduce their output tax liability. A recipient can claim ITC only when invoices are reported in GST returns.
On the GST portal, all inter-state coal purchase invoices of coke plants in Meghalaya are duly reflected, with corresponding e-way bills generated to record the movement of coal into the state.
“The challenge, however, lies in verifying the genuineness of such invoices. State GST officers cannot cross-check the returns of taxpayers registered in other states. Fake invoices are typically issued to pass on bogus ITC,” the minister said.
Invoices can only be established as fraudulent if the supplier is non-existent, if goods or services are not actually supplied, if taxes are not paid as declared, or if payment is made using bogus ITC, Mondal said.
However, he said, investigations of out-of-state suppliers fall under the jurisdiction of the Central GST authorities, specifically DGGI, which has the power to inspect business premises across different states.
As per GST portal records, 29 of 54 registered coke plants have been operational during 2022-25. Their cumulative turnover during the period stands at Rs 307.06 crore, with a total tax liability of Rs 18.75 crore. Of this, Rs 15.84 crore was discharged through ITC and the balance in cash. During the same period, these plants purchased 1,48,134 MT of coal from outside the state, valued at Rs 72.49 crore, with IGST of Rs 24.57 crore, the minister said.
Referring to the allegation, he stated that the report does not specify whether the fake invoice billing relates to the sale of coke by the plants or to the purchase of coal as raw material.
However, since the shell companies involved are located outside Meghalaya, it is likely that the fraud pertains to coal purchases by coke plants in that state, he said.
