How the Rich Use Illegal Tax Tricks: Vikas Gawri Exposes the Loophole!

Tax fraud isn't just a rare occurrence nowadays—it's also a well-planned game that some wealthy individuals and businesses trickily play to evade crores in taxes. Finance expert, Vikas Gawri uncovers how companies exploit a loophole using fake transactions, shell the companies, and GST input credits to save massive amounts of money.

The Illegal Tax-Saving Cycle

The scam begins when a business, say Tax Services Ltd., makes a profit of ₹50 lakhs. To evade taxes, the owner creates two more companies—DS Solutions and Phantom Ltd. These companies don't actually sell products but generate some fake transactions on paper to create a cycle of false purchases.

Here's how it works

Tax Services Ltd. shows a ₹50 lakh purchase from DS Solutions to reduce the taxable profits and claims an 18% GST input credit.

DS Solutions does the same process, reporting a ₹50 lakh purchase from Phantom Ltd.
Phantom Ltd. completes the whole cycle by showing a ₹50 lakh purchase from Tax Services Ltd.

Since no real transactions occurs, this strategy helps them to dodge taxes, inflate turnover, and even secure the bank loans fraudulently. Eventually, the shell companies shut down before the tax authorities catch up—leaving the government with massive losses.

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High-Profile Tax Frauds Using This Trick

This method has been used in some of India's biggest-ever financial scams. Nirav Modi, for instance, pulled off a ₹14,000 crore scam using the similar tactics, manipulating transactions and escaping before authorities could even take action.

Vikas Gawri's insight into this illegal tax-saving trick is indeed an eye-opener. While such fraudulent activities might seem profitable for some, they usually come with severe consequences, including hefty fines, legal action, and imprisonment. With some stricter tax regulations and digital tracking, authorities are now cracking down on such scams.

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