Innefu Labs, an Indian artificial intelligence company, said they have identified a suspected GST fraud network involving more than 1,500 registered businesses and an estimated ₹5,700 crore in potentially fraudulent input tax credit (ITC). Prophecy Eagle I, the company’s AI-powered financial intelligence platform, was used to identify the network by analyzing financial data and business registrations across various jurisdictions.
According to Innefu Labs, suspected transactions happened during one fiscal year. There were no fraudulent GST registrations or late returns, which makes it challenging to detect suspicious activity through individual compliance checks, the company said. It reportedly identified relationships between the entities by combining GST data, identity and transport data. However, the estimated exposure remains subject to verification by the concerned enforcement authorities, and the company has not presented the figure as an established recovery or final finding of fraud.
How AI detected links between 1,500 businesses
Prophecy Eagle I spotted some patterns that indicated potential organized financial fraud, Innefu Labs said. One involved the alleged reuse of the same facial identity across dozens of business registrations in different zones within a month.
The platform also identified newly registered companies that appeared to have moved large volumes of Input Tax Credit (ITC) within a few weeks of registration, despite little evidence of purchases. Another trend was circular trading, in which tax credits and transactions were passed back and forth among several companies and ended up near where they started.
What company said about investigation
The platform said that a second suspected supply chain diversion involved subsidized products allegedly being channelled into markets ineligible for subsidies.
According to Co-founder and CEO, Innefu Labs, the network was hard to recognize because the businesses appeared compliant when viewed individually. It was a platform that linked information from various databases to show patterns you wouldn’t see by looking at them individually, he said.
The system used identity correlation, behavioural analysis and network mapping to detect suspicious activity based on filing data, said Co-founder and CTO, Innefu Labs.
How Prophecy Eagle I works
Innefu Labs’ product description says that the Prophecy Eagle I uses data from GST documents, e-way bills, bank records, FASTag and open-source intelligence. It also leverages geospatial analysis and link mapping to discover links between businesses and financial transactions.
It is designed and set up to assist the enforcement agency in identifying suspicious registrations, circular trading, carousel fraud and vanishing trader schemes. It also assists in the analysis of electronic devices, financial documents and communications in investigations, said the company.
GST fraud cases worth thousands of crores in India
The alleged network is just a part of the ongoing tax authorities’ initiative against fake ITC claims. Fake ITC worth ₹36,374 crore was detected by the Central Board of Indirect Taxes and Customs (CBIC) during FY23-24 in 9,190 cases, according to a press release issued by the Ministry of Finance on 29 July 2024. The police also made 182 arrests in the same timeframe.
In another case, the Directorate General of GST Intelligence (DGGI), in its press release dated 11 July 2025, reported uncovering fake invoices worth over ₹266 crore and over ₹48 crore in fake ITCs from six shell companies. In addition, there was also evidence of circular trading and companies with no real business activity.
According to Innefu Labs, the Rs. 5,700 crore figure is the suspected financial exposure it has identified using its platform. The results have not yet been verified or gone through due process by the appropriate enforcement bodies, said the company.
