Flipkart arm Instakart found availing GST credit fraudulently

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December 24, 2020 2:30 AM

After DGGI refused Instakart’s plea to allow appearance of its officials via video conference, the company filed a writ petition in the Delhi High Court earlier this month.

However, while investigating a separate case, the Directorate General of GST Intelligence (DGGI) is learnt to have found that the accused had supplied fake invoices to these two vendors contracted by Instakart, which, in turn, had availed ITC based on invoices issued by these firms.However, while investigating a separate case, the Directorate General of GST Intelligence (DGGI) is learnt to have found that the accused had supplied fake invoices to these two vendors contracted by Instakart, which, in turn, had availed ITC based on invoices issued by these firms.

The GST Intelligence has found that Instakart Services, a subsidiary of Walmart-owned e-commerce company Flipkart, has availed fraudulent input tax credit (ITC) worth Rs 21 crore since July 2017, according to officials. The undue credit has been availed by the firm on the basis of fake invoices issued by two of its vendors engaged in ‘manpower supply’, they said.

A Instakart Services spokesperson said: “The investigation by the GST Intelligence wing concerns the non-payment of GST by two vendors. We are merely cooperating with the authorities to help with their findings to trace and track any wrongdoings by such vendors. We have paid each and every invoice of these vendors through banking channels and all documentary evidence has already been submitted to the department. The investigation is not to be misconstrued as being related to any wrongdoing by us — any such allegation is vehemently denied by us.”

However, while investigating a separate case, the Directorate General of GST Intelligence (DGGI) is learnt to have found that the accused had supplied fake invoices to these two vendors contracted by Instakart, which, in turn, had availed ITC based on invoices issued by these firms.

Further, after having issued summons to Instakart’s vendors, the DGGI found that these two firms didn’t exist at their given addresses. This was followed by summons issued to Instakart to investigate its dealing with these firms which only existed on paper.

The Instakart spokesperson added that the firm’s transactions with these vendors were based on the valid GST registration certificate issued to them by the department. “We are committed to supporting the regulators as they complete this investigation. This matter is also currently before the High Court and sub judice.”

After DGGI refused Instakart’s plea to allow appearance of its officials via video conference, the company filed a writ petition in the Delhi High Court earlier this month. DGGI is likely to argue that the evidence at this stage of investigation couldn’t be shared electronically due to its sensitive nature, sources said.

Instakart’s petition, which has been reviewed by FE, says tax payment to the government was not its responsibility as it had paid the due taxes to its suppliers.

It has also appealed for quashing the summons for personal appearance of its officials. Further, the petition has asked the court to direct DGGI to refrain from taking any coercive actions against the company or its officials. The first hearing took place on Monday and the government will submit a status report on the investigation in the second hearing scheduled for Thursday.

Sources said that the government contention is that the investigation was not on the issue of whether Instakart had paid GST to vendors on the supplies but was in relation to wrongful availment of ITC on the strength of fake invoices.

In the same petition, the firm has also challenged the constitutional validity of the sections of GST law that allow the government to recover any ITC availed by the company if its supplier fails to deposit tax.

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