The Punjab state taxation department has busted a major Goods and Services Tax (GST) fraud involving fake Input tax credit (ITC) transactions, leading to the registration of 12 FIRs and recovery of more than ₹20 crore.
Input tax credit refers to an illegal practice where businesses claim tax deductions on GST using fraudulent invoices. The deputy commissioner of state tax (DCST) Ludhiana division, Randhir Kaur said the racket was detected through a data-driven verification exercise comparing purchase details reflected in GSTR-2A/2B returns with corresponding e-way bill records.
The analysis exposed large-scale discrepancies, indicating fraudulent transactions and misuse of GST registrations.
According to the department, GST registrations granted under the government’s ‘Ease of Doing Business’ initiative were allegedly obtained using forged documents or later misused to create fictitious ITC chains and defraud the state exchequer.
Investigations revealed that several firms issued fake tax invoices without any actual supply of goods or services. These invoices were used to claim and pass on inadmissible input tax credit, causing substantial revenue losses to the government while also affecting genuine businesses in the supply chain.
Officials found that many entities had reported significant inward supplies in their GST returns, but corresponding e-way bills for the movement of goods were either missing or contained serious discrepancies. This prompted a detailed investigation into the firms.
During the probe, authorities discovered that several GST registrations had been obtained using fraudulent or manipulated documents. In some cases, the individuals shown as proprietors denied having any connection with the firms and stated that they had neither applied for nor authorised the use of their identities for GST registration.
The investigation further revealed that mobile numbers linked to these registrations were associated with fake Aadhaar-based identities, while bank accounts furnished during registration were either unverified or failed validation checks.
Based on these findings, the department initiated criminal proceedings against the accused persons and firms for fraudulently obtaining GST registrations and wrongfully availing and passing on input tax credit. Around 12 FIRs have been registered under sections of 318 (2) (cheating), 319 (2) (cheating by personation), 338 (possessing counterfeit marked material), 336 (3) (making a false document), 340 (2) (using a forged document as genuine) under the Bhartiya Nayaya Sanhita ( BNS) in the Ludhiana division.
Officials said the investigation also traced substantial amounts of fraudulent ITC passed on to multiple beneficiary firms, which used the fake credit to offset their tax liabilities. Coordinated action by the department has already resulted in the recovery of over ₹20 crore from the firms involved and the beneficiaries who utilised the fraudulent credit.
The department stated that while the ‘Ease of Doing Business’ framework was designed to promote legitimate trade and industry, some individuals had exploited the system by obtaining registrations through fraudulent documents and creating bogus ITC networks. It asserted that strict action would continue against all those involved to safeguard government revenue and curb tax evasion under the GST regime.
