Visakhapatnam Court Orders Judicial Custody for Neokred Executives in GST Evasion Probe
A special court in Visakhapatnam has taken decisive action by remanding two senior officials from Bengaluru-based Neokred Technologies Private Ltd to 14 days of judicial custody. This move comes in connection with a significant GST evasion case that is intricately linked to alleged online betting and gaming transactions. The court's decision underscores the seriousness of the allegations, which involve the routing of funds through shell entities to evade tax regulations.
Details of the Arrest and Allegations
The individuals remanded are Tarun Suresh Nazare, aged 33 from Bengaluru, and Rohith Reji, aged 30 from Pathanamthitta in Kerala. They have been placed in judicial custody until May 4 and are currently lodged at the Visakhapatnam Central Prison. The Directorate General of GST Intelligence (DGGI), Visakhapatnam unit, spearheaded the investigation, revealing that the probe targeted an organised syndicate allegedly operating illegal online gaming websites with support from various fintech firms.
According to the DGGI's remand report, Neokred Technologies played a pivotal role as a programme manager, master merchant, reseller, and payment gateway provider. The company was accused of onboarding merchant entities, including shell firms such as Eyebrawn Technologies Private Ltd. Investigators alleged that Neokred facilitated these entities in obtaining UPI IDs through banking partners like Fino Payments Bank, which were then used to route funds from online gaming platforms without complying with GST requirements.
Scope of the GST Evasion and Financial Impact
The DGGI detailed that UPI IDs issued under the guise of legitimate merchant activities were actually utilized to collect money from users on platforms including Teen Patti, Rummy Master, Dragon, and Rummy Online. These platforms were reportedly operating without proper GST registration, leading to substantial tax evasion. The agency emphasized that no evidence of actual goods or services supply was found in transactions involving Eyebrawn and Neokred, suggesting a deliberate network of shell entities created to conceal the true turnover of online money gaming operations.
Financial estimates indicate that funds amounting to approximately Rs 47 crore were routed through Eyebrawn alone, with an estimated GST evasion of around Rs 13 crore. This highlights the scale of the alleged tax avoidance, with GST levied at 28% on total turnover. The DGGI further alleged that Neokred had onboarded several other shell entities across multiple banks offering payment aggregator services, exacerbating the evasion.
Investigative Findings and Legal Proceedings
Searches conducted at Eyebrawn's premises on April 17 revealed that the firm was non-functional and had been established solely to channel funds from online gaming operations. The DGGI described Neokred as the master merchant that enabled onboarding with Fino Payments Bank for UPI integration. Additional searches at Neokred's registered premises on April 20 led to statements being recorded from employees, including the CEO and managing director. However, investigators reported that these officials failed to cooperate, providing evasive responses and not acknowledging factual details of agreements with Eyebrawn and Fino Payments Bank.
The agreements in question required Neokred to verify the genuineness of merchants' businesses and ensure that e-commerce transactions occurred through declared websites to prevent illegal activities. Yet, the DGGI alleged that no transactions were taking place via the actual merchant websites. Instead, customer data and UPI transaction trails linked to Eyebrawn showed that funds originated from online money gaming platforms. The remand report noted that Neokred exercised control over merchant onboarding, KYC verification, API integration, and transaction routing systems, with allegations of either systematic failure or deliberate omission in due diligence and risk monitoring.
Legal Implications and Future Actions
Invoking provisions of the CGST Act, the DGGI informed the court that the offence is cognisable and non-bailable, punishable with imprisonment of up to five years along with fines. This case highlights the ongoing crackdown on tax evasion in the digital and gaming sectors, with authorities intensifying efforts to curb illegal financial activities. The judicial custody of the Neokred officials marks a critical step in the legal process, as investigations continue to unravel the full extent of the alleged syndicate's operations and its impact on GST compliance.
