Kozhikode: A recent inspection by the Income Tax Department has revealed large-scale tax evasion amounting to ₹1,200 crore by several textile store groups in Kerala. The inspection also uncovered the use of specialised software to manipulate billing and commit systematic fraud, according to sources. 

Forensic experts from the IT Department, who supported the investigation, discovered that several clothing store chains were using a three-tier billing system to intentionally underreport income. The investigation reviewed sales data from 45 outlets operated by 10 major clothing retailers over a six-year period.

Their findings revealed that some stores used billing software that generated three separate invoices for each transaction, the sources said. While customers were given a receipt showing the full amount, including GST, two additional invoices were simultaneously created and stored separately on the server, allowing the stores to conceal actual earnings.

For example, one of these internal bills might reflect 70 per cent of the actual bill amount, while the other shows the remaining 30 per cent. The bill corresponding to the 30 per cent portion is routed to a hidden server, making it invisible during scrutiny by GST officials. As a result, only the 70 per cent bill shows up during audits, giving the false impression of lower sales and reducing the tax liability.

This software is capable of splitting the billing in any ratio, thus concealing the true transaction value. GST officials are unable to trace the original bill provided to the customer, as it is deliberately excluded from the system records.

Further inspection uncovered that some transaction records were either entirely deleted or partially erased from the system. The fully deleted bills were primarily linked to cash payments.

Additionally, digital payments were found to be diverted across multiple bank accounts. Investigators discovered that funds were split and transferred to four to five different accounts using separate QR codes, a tactic seemingly designed to mislead authorities and obscure the money trail.

Hawala transactions worth crores of rupees have also come to light. Under this arrangement, hawala agents provide money to textile store owners outside Kerala, and in return, garments worth an equivalent amount are sent to stores within the state. The cycle is completed when the Kerala-based textile stores hand over the same amount to local hawala operatives.