VRG Digital Corporation Pvt Ltd, a company linked to Vijay Ratnakar Gutte, the director of the film The Accidental Prime Minister, is not only facing charges of violating Indian tax laws but also allegedly indulged in “circuitous transactions” with a few domestic firms to “defraud” the British Film Institute and claim tax rebates in the United Kingdom, according to court filings seen by The Indian Express.
The British Film Institute is the principal agency for certification of a film as British. Under the UK Creative Industry Tax Reliefs, the British government allows up to 25 per cent tax concession for films qualifying as British films. To qualify as one, production companies should be within the UK corporation tax net and at least 10 per cent of the expenditure in making the film should be spent in the UK. The tax relief is available on the actual expenditure incurred in the UK or 80 per of total filmmaking expenses, whichever is lower.
A remand application filed by the Directorate General of Goods and Services Tax Intelligence (DGGSTI) in a local court said that VRG Digital Corporation, Bombay Casting Talent Management Pvt Ltd (BCTMPL), a Bohra Bros Group firm, and Horizon Outsource Solutions undertook circuitous transactions to show higher quantum of money invested by BCTMPL into The Accidental Prime Minister. Bohra Bros is one of the producers of the film. The transactions, according to the remand application, were undertaken to “defraud” the British Film Institute to access the tax rebate.
Vijay Gutte, the son of sugar baron Ratnakar Gutte, was on the board of VRG Digital till November 2018. The DGGSTI had arrested Gutte on August 2 and he is currently out on bail.
Contacted by The Indian Express, Gutte said the tax relief was claimed by submitting genuine papers and the producers have followed the necessary procedure. Emails sent to BCTMPL did not elicit any response.
The British Film Institute told The Indian Express it cannot share details of tax rebates. “Due to strict confidentiality and data protection polices, we are unable to share any information regarding projects that may or may not have applied to the BFI for Certification… Additionally, we do not hold information on the amount of tax relief projects… as this is administered directly by HMRC (Her Majesty’s Revenue and Customs),” said Colette Geraghty, senior PR Manager at the British Film Institute in an email.
In India, VRG Digital Corporation is accused of making “fake invoices” involving GST of Rs 34 crore for animation and manpower services received from Horizon Outsource Solutions Pvt Ltd, a company that is also under the scanner of the DGGSTI for a GST fraud of over Rs 170 crore.
VRG Digital Corporation is also accused of wrongly claiming cash refund of Rs 28 crore from the government against CENVAT (Central Value Added Tax) credit received for these fake invoices since July 2017.
The DGGSTI said VRG Digital paid Rs 115 crore to BCTMPL between June 2017 and September 2017 through Horizon Outsource even though the actual services were provided by BCTMPL.
Gutte told The Indian Express, “There is no case against VRG Digital. There are no circuitous transactions. The government department misunderstood the situation and thought I was part of a racket run by Horizon Outsource Solutions involving a fraud of Rs 170 crore. In fact, I was a victim of the scam run by Horizon. I had paid Rs 34 crore to Horizon and, instead of paying the government, Horizon ran away with the money. I have filed a Rs 100 crore suit against Horizon Outsource. But I am glad the department arrested me because I believe that is how investigations in this country should be done.”
Gutte was also associated with VRG Digital Corporation’s UK subsidiary After Studios UK Ltd, which is involved with the digital intermediate and VFX of The Accidental Prime Minister. He resigned from After Studios UK’s board in August 2018.
Gutte said he had transferred his entire stake in VRG Digital to his sister in January 2017. “I am a creative person and since I was busy with the shooting of The Accidental Prime Minister, I was not able to devote enough time to these companies.”
The Indian Express had first reported, on May 19, that directors of Mumbai-based firms Horizon Outsource and Best Computer Solutions Pvt Ltd were arrested in connection with alleged service tax and GST fraud of Rs 173 crore.
The DGGSTI has found that Horizon Outsource had wrongly taken GST credit of Rs 80 crore from the government by showing fake invoices of software services received from Best Computer Solutions. The probe has also found that Horizon Outsource issued bogus invoices showing GST of Rs 47 crore to its clients.
The agency’s probe has revealed that VRG Digital Corp was one of the top clients of Horizon Outsource and was shown as receiving services of about Rs 266 crore with a GST implication of Rs 40 crore, even as there was no actual supply of services.
The Accidental Prime Minister is Gutte’s directorial debut, and is based on a book of the same name by Sanjaya Baru. The film stars Anupam Kher as former PM Manmohan Singh and Akhshaye Khanna as Singh’s media advisor Baru. It is slated for release on January 11.