- GST intelligence arrests alleged mastermind in ₹1,825 crore ITC fraud.
- Accused controlled fake firms using borrowed documents for fraudulent refunds.
- Scheme involved fake invoices and misdeclared goods for inflated claims.
The Directorate General of GST Intelligence (DGGI) has uncovered an input tax credit (ITC) fraud worth ₹1,825 crore and arrested the alleged mastermind at New Delhi airport on Sunday, the finance ministry said in a statement on Monday.
According to the ministry, the individual was detained upon arrival from Dubai. He was wanted in multiple economic offence cases and had failed to respond to nearly two dozen summons issued by DGGI, never joining the investigation.
‘Well-Structured’ Fraud Network
Investigations revealed a “well-structured arrangement” designed to fraudulently claim ITC and encash it through refund claims on zero-rated supplies, or exports.
Such schemes typically involve the use of fake invoices to claim tax credits on raw materials, which are later refunded when exporters and domestic firms are unable to fully offset input taxes against output liabilities.
Network Of Dummy Firms
The ministry said the accused controlled a network of dummy firms operated through employees and close associates.
These entities were created using borrowed ‘know your customer’ (KYC) documents and were found to be non-functional or lacking infrastructure, manpower and genuine business activity at their declared locations.
“The dummy proprietors/directors were merely name lenders and were compensated with fixed monthly cash payments. All operational activities including GST registration, invoice generation, banking operations, filing of returns and submission of refund claims were handled centrally by the masterminds,” the ministry said.
Fake Invoices And Layered Transactions
The fraud involved generating fake purchase invoices without any actual movement of goods. High-value tobacco products were shown in invoices to create substantial ITC, which was then routed through multiple intermediary firms to form layered transaction chains.
This process enabled the transfer of ITC across entities through paper transactions, creating an artificial trail of trading activity.
Misdeclaration To Inflate Refund Claims
Investigators found that low-value tobacco, inferior smoking mixtures and other tobacco products were procured locally at nominal prices, often without invoices, and then mis-declared as high-value products.
The inflated turnover was subsequently used to claim refunds, the ministry said.
