Lucknow: Action against networks allegedly involved in GST evasion through fraudulent Input Tax Credit (ITC) has intensified in Uttar Pradesh. According to figures presented by the Union Finance Ministry in the Rajya Sabha, authorities detected fake ITC worth ₹12,015 crore in 1,356 cases across the state during the last three financial years. A total of 55 people were arrested during the period. Nationwide, more than ₹1.69 lakh crore worth of fraudulent ITC was detected over the same three years, with Uttar Pradesh accounting for around 7.07% of the total.
During the financial year 2023-24, authorities detected fraudulent ITC worth ₹2,113 crore in 271 cases and made 11 arrests. In 2024-25, the value of detected fraud increased to ₹5,149.69 crore, while 19 people were arrested. During 2025-26, 637 cases involving ₹4,751 crore in fraudulent ITC were detected, and the number of arrests rose to 25.
Shell Firms Created Using Fake Identities
Investigations have indicated that syndicates involved in fraudulent ITC allegedly obtain GST registrations using stolen or forged PAN and Aadhaar documents. They then create firms that exist largely on paper, with little or no genuine business activity. Invoices are allegedly generated between these firms without actual supply of goods or services, allowing ITC to be transferred through fictitious transactions.
Such networks have been linked to sectors including iron and steel, textiles, plastics, paper, plywood, cement, copper, works contracts, manpower supply and real estate. Economic offences expert Devendra Dang said such fraud goes beyond tax evasion because it affects government revenue and the broader economic system. Courts have also treated economic offences as a distinct category, stressing that such cases should not automatically receive the same leniency as ordinary offences.
Three Firms in Family Members’ Names, ₹16.65 Crore in Fictitious Business
An investigation involving a major event management firm in Lucknow has revealed another alleged method of generating fraudulent ITC. According to the investigation, separate proprietorship firms were registered in the names of three family members. The firms allegedly carried out purchase and sale transactions on paper without corresponding genuine business activity, facilitating the transfer of fraudulent ITC.
Investigators found that the firms shown as suppliers had allegedly transferred ITC without making genuine purchases themselves. Through the alleged arrangement, transactions worth around ₹16.65 crore were shown, resulting in an estimated tax evasion of about ₹3 crore.
During the investigation, the concerned trader deposited ₹30 lakh with the authorities. The department is examining the complete transaction trail and records of the firms involved to determine the extent of the alleged irregularities.
₹24 Lakh Consignment Detected Through Reused E-Way Bill
A separate case in Kaushambi has highlighted the alleged misuse of e-way bills. During an inspection operation, the state tax department’s mobile enforcement team began checking vehicles using service roads to avoid toll plazas. A vehicle bearing registration number UP 32 WN 8258 came under suspicion.
When the driver produced the invoice and e-way bill, officials examined the documents and found that the same invoice and e-way bill had allegedly already been used for a consignment of pan masala and tobacco that had previously been delivered to Kaushambi. Toll plaza records also reportedly confirmed the earlier movement of the consignment.
The department subsequently brought the consignment, valued at around ₹24 lakh, under investigation. Officials are examining the documents and movement records to determine how the same e-way bill was allegedly used again.
Digital Records Helping Trace Tax Evasion Networks
The GST department is examining invoices, e-way bills, bank accounts, GST returns and registration documents in such cases. Officials suspect that fraudulent ITC networks often create a chain of paper transactions in which one firm issues invoices to another without any genuine movement of goods or provision of services.
The alleged reuse of e-way bills has added another challenge for tax authorities because such documents are intended to establish the movement of goods and support the legitimacy of commercial transactions.
The increasing number of cases indicates that GST fraud networks are no longer limited to simple fake invoicing. Investigators are encountering alleged use of stolen identities, shell firms, digital documents and multiple layers of financial transactions to conceal the actual beneficiaries.
Authorities are now attempting to trace the complete transaction chains, identify the people controlling the shell firms and determine whether the same networks operated across multiple sectors and states. Further action is expected as investigations into the financial records and digital trails progress.
About the author — Suvedita Nath is a science student with a growing interest in cybercrime and digital safety. She writes on online activity, cyber threats, and technology-driven risks. Her work focuses on clarity, accuracy, and public awareness.
