Kanpur: A major financial fraud involving GST and fake input tax credit (ITC) has been exposed in Uttar Pradesh’s Kanpur, where authorities have uncovered tax evasion of nearly ₹5.30 crore through two allegedly bogus firms. According to state tax department officials, the companies allegedly created fake purchase and sales records to fraudulently claim ITC benefits, causing significant revenue loss to the government. Following a formal complaint, police have registered cases against both firms under the Swaroop Nagar police jurisdiction, and a detailed investigation has been launched.
Discrepancies Uncovered at Rahul Traders
Investigators identified the first firm as “Rahul Traders.” During departmental scrutiny, it was found that the firm reported an inward supply of only ₹81.46 lakh during the financial year 2025–26, while showing outward supply exceeding ₹2.52 crore. Officials said the mismatch between actual and reported business activity raised suspicion that inflated turnover figures were being used to unlawfully claim input tax credit.
During verification and document analysis, authorities confirmed fraudulent ITC claims worth approximately ₹1.25 crore. Officials stated that due to this systematic manipulation, the government suffered a revenue loss of nearly ₹3.10 crore. When inspection teams visited the registered address of the firm, they found no operational business activity, and the premises appeared non-functional. Investigators also reported that there was no reliable information available regarding the firm’s alleged operator, Rahul Kumar.
Paper Entities and Syndicated Operations
Similarly, another entity, “AS Enterprises,” came under scrutiny after officials discovered serious irregularities during inspection. According to investigators, the lease agreement submitted for the registered address was found to be fake. Preliminary findings suggest that the firm may have existed only on paper and was allegedly being used as part of a broader fake billing and tax evasion network.
Officials stated that bank records, GST returns, e-way bills, purchase-sale invoices, and digital transaction data are being thoroughly examined in both cases. Investigators are trying to determine whether the firms were part of a larger organised syndicate involved in generating fake invoices and circulating fraudulent ITC across multiple entities.
The Mechanics of Organized ITC Fraud
Cyber and economic crime expert and former IPS officer Prof. Triveni Singh noted that GST and ITC frauds have become a significant component of organised financial crime in recent years. According to him, perpetrators often create shell companies, generate fictitious trade transactions, and exploit documentation gaps to claim unlawful tax credits. He added that such networks frequently rely on fake addresses, rented bank accounts, and layered transactions to evade detection by enforcement agencies.
Forensic Investigation and Legal Action
Authorities further stated that digital and forensic financial investigations are underway to identify the real beneficiaries behind these firms. Mobile phone records, email communications, banking data, and GST portal login credentials are being analysed to trace the operational network. Investigators are also examining whether the racket has links extending beyond Kanpur to other districts or states.
Cases have been registered under charges of fraud, forgery, falsification of documents, and causing loss to government revenue. Officials indicated that as the forensic examination of financial and digital records progresses, further revelations and possible arrests are likely in this expanding tax evasion investigation.
About the author – Rehan Khan is a law student and legal journalist with a keen interest in cybercrime, digital fraud, and emerging technology laws. He writes on the intersection of law, cybersecurity, and online safety, focusing on developments that impact individuals and institutions in India.
