Bengaluru–In a major crackdown on tax evasion under the Goods and Services Tax (GST) regime, the Enforcement Wing (South Zone) of Karnataka’s Commercial Taxes Department has dismantled a large interstate fake invoicing cartel involving fraudulent transactions worth Rs 1,464 crore. Four key accused have been arrested in a coordinated operation spanning Karnataka and Tamil Nadu.
According to officials, the syndicate orchestrated bogus transactions in building materials such as cement, iron and steel, fraudulently claiming and passing on Input Tax Credit (ITC) of around Rs 355 crore without any actual movement of goods. The scam exploited loopholes in the GST system through circular trading and fake invoicing, causing significant losses to the exchequer.
The fraud was unearthed using advanced data analytics within the GST framework. Investigators employed the department’s in-house Non-Genuine Taxpayer (NGTP) module and tracked IP address trails from the GST back office to identify suspicious invoicing patterns and circular ITC flows among interconnected entities. Officials said this technology-driven approach played a crucial role in detecting and dismantling the network.
Further investigation revealed an elaborate web of shell companies created using forged and fabricated documents. The accused allegedly obtained multiple GST registrations using fake stamp papers purchased online, fraudulent rental agreements, forged signatures, bogus tax receipts and counterfeit notarial stamps. These entities existed largely on paper, issuing fake invoices to generate and pass on illegal ITC.
Officials said that once large amounts of ITC were siphoned off, the firms would voluntarily cancel their GST registrations, a tactic described as a new ploy to evade audits and erase digital and financial trails. The Enforcement Wing noted that this emerging trend has prompted authorities to consider additional safeguards to prevent misuse of the system.
The operation culminated in synchronised search and seizure raids across Bengaluru, Chennai, Vellore and Pernampattu. Investigators seized 24 mobile phones, 51 SIM cards, two pen drives, bank statements and rubber stamps belonging to various firms, which are expected to provide further insights into the cartel’s financial dealings and interstate links.
In a significant example of interstate coordination, four alleged masterminds were arrested with active support from Tamil Nadu’s Commercial Tax authorities. Brothers Irbaz Ahmed and Nafiz Ahmed from Tamil Nadu, who allegedly operated bogus firms including Trion Traders, Wonder Traders, Royal Traders and Galaxy Enterprises, were arrested in Pernampattu.
In Bengaluru, Eddala Pratap and his associate Revati were detained for allegedly running shell entities such as Power Steel and Cement, P.R. Construction, S.V. Traders and S.R.S. Cement Steel Traders. All four were produced before the Special Court for Economic Offences in Bengaluru, which remanded them to 14 days of judicial custody.
Officials said investigations are ongoing and more arrests are likely as authorities continue to trace the money trail and identify other beneficiaries involved in the large-scale GST fraud. (Source: IANS)
