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An Indian AI firm claims to have detected a suspected ₹5,700 crore GST fraud network involving over 1,500 registered businesses.
Innefu Labs said its artificial intelligence-powered financial intelligence platform, Prophecy Eagle I, identified suspicious transactions and connections between businesses across multiple jurisdictions. The suspected network involved an estimated ₹5,700 crore in potentially fraudulent input tax credit (ITC) claims during a single financial year. However, the company clarified that its findings remain subject to verification by enforcement authorities and do not represent an officially established fraud or confirmed financial recovery.
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How Was the Suspected GST Fraud Detected?
According to Innefu Labs, the platform analysed financial records, business registrations and transaction patterns to identify connections that might escape conventional compliance checks.
The analysis reportedly identified repeated use of the same facial identity across dozens of business registrations in different zones within a month. It also detected newly registered companies transferring substantial amounts of input tax credit shortly after registration, despite limited evidence of actual purchases.
Another suspected pattern involved circular trading, where tax credits and transactions moved repeatedly between companies before returning close to their original source.
The company said these businesses appeared compliant when examined individually, making the suspected network difficult to identify through routine checks.
What Technology Was Used in the Investigation?
Prophecy Eagle I combines information from GST documents, e-way bills, banking records, FASTag data and open-source intelligence to examine financial relationships.
The platform uses identity correlation, behavioural analysis, geospatial analysis and network mapping to identify suspicious registrations and transaction patterns.
According to Innefu Labs co-founder and CEO Tarun Wig, linking information from multiple databases helped reveal connections that were not apparent when businesses were examined separately. Co-founder and CTO Abhishek Sharma said the system identified suspicious activity through filing data and network analysis.
What Other Irregularities Were Identified?
The company also reported detecting a separate suspected supply chain diversion involving subsidised products allegedly being channelled into markets where subsidies were unavailable. Its platform is designed to assist enforcement agencies in examining suspicious registrations, circular trading, carousel fraud and vanishing trader schemes. It can also support the examination of financial documents, electronic devices and communications during investigations.
However, the company has not established that all flagged businesses committed fraud. The estimated financial exposure remains an analytical finding requiring official verification.
What Do Previous GST Fraud Cases Show?
The findings come against a backdrop of substantial fake input tax credit cases identified by Indian tax authorities.
According to the Ministry of Finance, the Central Board of Indirect Taxes and Customs detected ₹36,374 crore in fake ITC across 9,190 cases during 2023-24. Authorities also made 182 arrests during that period.
In another case, the Directorate General of GST Intelligence reported detecting fake invoices exceeding ₹266 crore and fraudulent ITC exceeding ₹48 crore involving six shell companies in July 2025.
Those investigations also identified circular trading and businesses without genuine commercial activity.
Innefu Labs maintained that its ₹5,700 crore estimate represents suspected financial exposure identified through AI analysis. The findings have not yet undergone verification or due process by the relevant enforcement agencies, leaving the actual extent of any fraud undetermined.
