In a sweeping crackdown on tax fraud, Delhi’s Department of Trade and Taxes has exposed a ₹14 crore GST refund scam. A single proprietor behind four shell companies has been arrested, 45 bank accounts have been frozen, and ₹1.16 crore has been recovered so far. The fraud involved a sophisticated network spanning multiple states and even foreign jurisdictions such as Hong Kong and Singapore.
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A Web of Shell Firms and False Refunds
The Delhi government’s Department of Trade and Taxes has unearthed a Goods and Services Tax (GST) refund fraud worth ₹14 crore. Acting on leads developed through intensive data analytics and cross-agency coordination, the department arrested a Delhi-based proprietor at the center of a network involving four fictitious firms. The accused allegedly created fraudulent invoices and bogus transaction trails to illegitimately claim refunds meant for genuine businesses.
The scam was brought to light following irregularities spotted during routine audits and system-generated red flags. Further investigations revealed a coordinated use of identical PAN numbers, mobile numbers, and email addresses across multiple entities, some located within Delhi and others traced to different states and even international financial hubs.
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Follow the Money: From Delhi to Hong Kong and Back
Authorities say that the scam was not limited to domestic financial trickery. Using banking transaction data, officials were able to map the flow of funds from Delhi-based accounts to other Indian states and overseas destinations, including Hong Kong and Singapore. These accounts were linked to 27 implicated entities, whose operations are now under scrutiny by multiple regulatory agencies.
The funds didn’t just sit idle, they moved rapidly across borders. This was a textbook case of using fake invoicing and identity duplication to exploit the GST refund system, as stated by a senior department official. As an immediate action, the GST registration of all Delhi-based suspect entities has been suspended. Additionally, key information has been disseminated to tax enforcement bodies in other jurisdictions for further investigation.
PANs Flagged, FIR Filed, and Crackdown Intensifies
The department has recovered ₹1.16 crore so far and is working to seize the remaining sum. A First Information Report (FIR) has been filed with the Economic Offences Wing (EOW), and collaboration with the Income Tax Department has led to several PAN numbers being flagged for potential misuse. Authorities emphasized that more arrests are likely in the coming days as the fraud appears to be part of a larger syndicate leveraging GST loopholes. Tax officials are calling for systemic changes to the refund mechanism to prevent such exploitation in the future.
About the author – Prakriti Jha is a student at National Forensic Sciences University, Gandhinagar, currently pursuing B.Sc. LL.B (Hons.) with a keen interest in the intersection of law and data science. She is passionate about exploring how legal frameworks adapt to the evolving challenges of technology and justice.