Mumbai, Feb 28 (PTI) Directors of two companies were today arrested by the Goods and Services Tax authorities here for alleged tax evasion to the tune of over ₹ 7 crore, in what could be the first arrests under the new indirect taxation regime.

CGST Mumbai Central Commissionerate arrested Sanjiv Pravin Mehta, director of Shah Brothers Ispat Pvt Ltd, and Vinaykumar D Arya, director of V N Industries, for availing of "ineligible credit" of ₹ 5.20 crore and ₹ 2.03 crore, respectively, in separate cases, the Commissionerate said.

The alleged offence committed by Shah Brothers Ispat is non-bailable while that by VN Industries is bailable as the amount is below ₹ 5 crore, it added in the statement.

It was possible that similar fraud had taken place in several other companies, it said in the statement.

"They (the companies) were only exchanging invoices for so-called sale and purchase. There was only paper and invoice movement, but no actual sale or purchase of goods," the statement said.

Investigation revealed that these exchanges were being done with a "malafide intention to defraud the exchequer by opening Letters of Credit (LCs) on fake purchase transactions" the statement added.

GST credit fraud prompts arrest of company directors for alleged use of ineligible input tax credits and fake invoices. Two directors were arrested for allegedly obtaining substantial ineligible credit under GST by exchanging invoices that recorded only paper sale and purchase transactions with no actual movement of goods, and by opening Letters of Credit on fake purchase transactions, conduct described as undertaken with a malafide intention to defraud the exchequer. One alleged offence is classified as non-bailable due to the scale of claimed credits while the other is within bailable limits.