Introduction to the GST Fraud Scandal
In a high-profile development, Hyderabad CCS Police have filed a case against former government chief secretary Somesh Kumar in connection with a large-scale GST fraud. The case follows a complaint by the Commercial Tax Department, implicating several high-ranking officials and tech companies in a tax evasion scheme amounting to thousands of crores.
Key Players and Charges in the GST Fraud
The additional commissioner of the Commercial Tax Department, S.V. Kashivishweshwar Rao, Hyderabad Rural deputy commissioner Shivarama Prasad, IIT Hyderabad assistant professor Shobhan Babu, and the private firm Pliento Technologies Pvt. Ltd. are listed as co-accused. Somesh Kumar has been named as the fifth defendant in the FIR. According to a complaint by the Joint Commissioner of the Commercial Tax Department, Ravi Kanuri, these individuals allegedly facilitated tax evasion, leading to a massive financial loss for the state.
The Scope of the Tax Evasion
The fraud is extensive, with the Telangana Beverages Corporation alone causing a loss of over ₹1,000 crores through tax evasion. Additionally, eleven private companies have been initially found to have evaded approximately ₹400 crores. This has triggered a thorough investigation by the authorities.
BigLeap Technologies and Deep Investigation
According to the FIR, BigLeap Technologies and Solutions Pvt. Ltd., a company that supplies human resources, fraudulently claimed an input tax credit of ₹25.51 crores without actually paying the tax. This led to an internal investigation by the Commercial Tax Department. As the technology service provider for the department, IIT Hyderabad was responsible for identifying and analyzing discrepancies in IT returns filed by taxpayers. However, BigLeap’s fraudulent activities went undetected by the scrutiny module developed by the service provider, raising questions about the integrity of the software.
Software Manipulations and Whistleblower Reports
In light of BigLeap’s fraudulent activities, an official appointed by the Commercial Tax Department conducted an inquiry at the IIT Hyderabad campus on December 26th of the previous year. The investigation revealed that under oral instructions from then Revenue Special Chief Secretary Somesh Kumar, S.V. Kashivishweshwar Rao, and Shivarama Prasad, software modifications were made to prevent the detection of these fraudulent activities. This led to significant financial losses for the government, particularly in IGST-related transactions.
The WhatsApp Group: A Coordinated Effort
Further investigation uncovered a ‘Special Initiatives’ WhatsApp group, where frequent instructions were given to project investigator Prof. Shobhan Babu. Members of this group included Somesh Kumar, S.V. Kashivishweshwar Rao, and Shivarama Prasad. This group was established under the supervision of Somesh Kumar and was operational until December 2022. The group’s activities continued into February 2024, prompting high-ranking officials of the Commercial Tax Department to issue urgent memos demanding a detailed chat history, including photos and videos.
Forensic Audits and Final Reports
A forensic audit conducted by C-DAC revealed that activities of 75 taxpayers were deliberately hidden online to facilitate tax evasion. Additionally, transactions meant to be confined to IIT Hyderabad and the Commercial Tax Department were accessed by an entity with an IP address located in Hindupur, linked to Pliento Technologies.
IIT Hyderabad’s Role and the Fallout
The Commercial Tax Department also sought a report from C-DAC regarding databases and audit applications managed by IIT Hyderabad. This led to a meeting on January 30th between officials from C-DAC, IIT Hyderabad, and the Commercial Tax Department. It was disclosed that instructions were frequently given to Prof. Shobhan Babu through the ‘Special Initiatives’ WhatsApp group. Based on these revelations, the Commercial Tax Department demanded explanations from S.V. Kashivishweshwar Rao and Shivarama Prasad regarding their involvement and ordered a change in the project investigator overseeing the forensic audit to ensure transparency.
Legal and Administrative Actions
Following these findings, the Commercial Tax Department seized the mobile phones of S.V. Kashivishweshwar Rao and Shivarama Prasad. Both officials approached the High Court, but their petition was dismissed. Additionally, the Commercial Tax Department wrote to the IIT Hyderabad director, requesting a change in the project investigator to ensure the forensic audit proceeded without bias. In response, IIT Hyderabad sent documents related to SGST and CGST draft notices, excluding IGST-related documents, highlighting the complexity and depth of the investigation.
Conclusion: A Call for Accountability
The final forensic report by C-DAC confirmed that online activities of 75 taxpayers were deliberately hidden to aid tax evasion. These findings underscore the extensive coordination and manipulation within the system, involving high-ranking officials and tech companies. The Commercial Tax Department continues to pursue the matter, seeking accountability and systemic reforms to prevent such large-scale frauds in the future.