The State Tax Department has cancelled the registrations of nearly 400 fake and non-existent firms in and around Kanpur as part of a year-long crackdown on alleged tax evasion and fraudulent Input Tax Credit claims. Officials said FIRs have also been registered against 38 scrap-related firms suspected of playing a key role in the alleged fraud, while tax collection in the Kanpur zone has increased by about 10 percent compared to the previous year.
According to departmental sources, many of the identified firms existed only on paper and had little or no genuine business activity. Investigators allege that these entities were created to generate fake invoices and facilitate fraudulent ITC claims, causing substantial losses to government revenue.
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Fake Firms Used for ITC Claims
Investigators suspect that fraudsters used names, addresses and forged or incomplete documents of unsuspecting individuals to obtain GST registrations and create a network of shell companies. These entities allegedly showed transactions worth crores of rupees without any actual supply, purchase or sale of goods.
Through this mechanism, fraudulent Input Tax Credit was allegedly generated and passed on to other entities in the chain. Officials believe this allowed businesses to illegally reduce tax liabilities while creating an artificial transaction trail.
The department has indicated that a significant number of suspected entities were linked to the scrap trade. Based on preliminary findings, FIRs were lodged against 38 scrap-related firms, and further inquiry is underway.
Raids, Inspections and Credit Blocking
The enforcement drive was conducted during the 2025-26 financial year. Under the operation, tax teams carried out raids and inspections at the premises and registered addresses of 108 firms identified as suspicious.
Officials examined business records, financial documents and transaction histories to verify whether the firms were carrying out genuine operations. During these inspections, authorities blocked Input Tax Credit worth crores of rupees suspected to have been claimed fraudulently.
Sources said the operation covered businesses under both Central and State GST authorities. Investigators used intelligence inputs, data analytics and transaction monitoring tools to identify suspicious patterns and establish links among entities allegedly involved in the scheme.
Revenue Rises After Enforcement Drive
Officials said strict enforcement and continuous monitoring have helped reduce tax evasion activity in the region. The department has linked the nearly 10 percent rise in revenue collection to action against fake firms and fraudulent credit claims.
Cybercrime expert and former IPS officer Prof. Triveni Singh said organised economic offences increasingly rely on digital documentation, forged identities and shell companies to exploit regulatory systems. He said data analytics, financial tracking and document verification are critical to identifying such frauds.
Authorities have indicated that investigations into additional networks suspected of using fake documentation and fraudulent transactions are continuing. The department has said future enforcement drives will be expanded to safeguard public revenue and protect the integrity of the GST system.
