In a significant development, the Enforcement Wing (South Zone) of Karnataka’s Commercial Taxes Department has uncovered and dismantled an extensive interstate fake invoicing network affecting India’s Goods and Services Tax (GST) system. This syndicate, operating in Karnataka and Tamil Nadu, orchestrated fraudulent transactions amounting to a massive Rs 1,464 crore in construction materials like cement, iron, and steel. These activities led to the wrongful claiming and passing of Input Tax Credit (ITC) valued at around Rs 355 crore, all without any physical movement of goods.
The breakthrough in uncovering this illicit operation was achieved through advanced analytics within the GST framework, as stated recently. By utilizing their in-house Non-Genuine Taxpayer (NGTP) module and tracking IP addresses from the GST back office, investigators identified suspicious invoicing patterns and circular ITC flows among interconnected entities. This data-driven strategy initiated a well-planned enforcement action, showcasing how technology is transforming the battle against fiscal fraud.
Further investigations revealed a complex web of deception where fraudsters obtained multiple GST registrations using forged documents such as online-purchased stamp papers, fake rental agreements, falsified signatures, counterfeit tax receipts, and bogus notarial stamps. These fraudulent registrations gave rise to layers of shell companies that issued fake invoices, creating a facade of legitimate business operations while channeling illicit credits.
After siphoning off substantial ITC, the entities voluntarily cancelled their registrations, a tactic seen as a new method to evade audits and eliminate traces. This trend has prompted the Enforcement Wing to explore additional measures to close such gaps in the system. The operation culminated in coordinated search and seizure actions across Bengaluru, Chennai, Vellore, and Pernampattu, resulting in the confiscation of crucial evidence like mobile phones, SIM cards, pen drives, bank statements, and rubber stamps from various firms. These seized items are expected to provide deeper insights into the cartel’s activities, finances, and cross-border connections.
In a significant display of interstate cooperation, four key figures were apprehended, with Tamil Nadu’s Commercial Tax authorities playing a crucial role. Brothers Irbaz Ahmed and Nafiz Ahmed from Tamil Nadu, associated with fictitious entities like Trion Traders, Wonder Traders, Royal Traders, and Galaxy Enterprises, were arrested in Pernampattu. In Bengaluru, Eddala Pratap and his partner Revati, operating under names such as Power Steel and Cement, P.R. Construction, S.V. Traders, and S.R.S. Cement Steel Traders, were also taken into custody. All four individuals were presented before Bengaluru’s Special Court for Economic Offences, where they were remanded to 14 days of judicial custody.
