The Crime Branch in Bareilly has busted an organised gang involved in large-scale Goods and Services Tax (GST) fraud by setting up bogus firms and generating fake invoices to illegally claim input tax credit (ITC). One key accused, Gaurav Agarwal, has been arrested, while efforts are on to trace other members of the network, which investigators say extends across several states. Preliminary findings point to a GST fraud of nearly ₹14 crore, with the total amount suspected to be close to ₹20 crore.
The case came to light following a complaint filed in October 2025 at the Bithri Chainpur police station by the GST department. The complaint alleged that a fictitious firm named ‘Shri Shyam Traders’ had been created and fraudulently registered under GST. Using forged bills and invoices, the firm allegedly passed on fake input tax credit without any actual supply of goods or services, causing significant loss to the government exchequer.
During the investigation, the Crime Branch scrutinised bank accounts, transaction trails and digital records linked to the firm. This led investigators to Gaurav Agarwal, whose role emerged as central to the operation. He was subsequently taken into custody. During questioning, Agarwal reportedly admitted to being associated with the racket for several years and to floating multiple fake firms under different names to generate bogus bills, invoices and e-way bills for illegal ITC pass-on.
Investigators say the gang exploited loopholes in the GST system by creating paper transactions that existed only on official records. No physical movement of goods took place, but documentation was meticulously prepared to make the transactions appear legitimate. Such practices not only drain government revenue but also distort fair competition by allowing fraudulent entities to undercut genuine businesses.
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Network Spread Across States
The probe has revealed that the racket was not confined to Bareilly alone. Fake firms linked to the network were registered in Meerut, Delhi, Bihar, Uttarakhand and West Bengal, indicating a well-coordinated, multi-state operation. These firms were allegedly used to rotate invoices and circulate fake tax credit, making the fraud harder to detect at an early stage.
Investigators suspect that several other individuals acted as facilitators, dummy proprietors or beneficiaries within the network. Many are believed to have operated behind the scenes, handling documentation, banking channels and compliance filings to keep the scheme running smoothly.
During the arrest, the Crime Branch recovered four mobile phones from Agarwal. Officials say the devices contain suspicious digital data, including transaction details, communication records and documents related to the fake firms. The phones have been sent for forensic examination, which is expected to provide crucial leads about other participants and the scale of the fraud.
After being produced before a court, the accused was remanded to judicial custody. Meanwhile, investigators are examining how many GST returns were filed using forged data, which firms availed fake ITC, and how the illicit proceeds were routed or utilised.
Warning Signal for GST Compliance
The Bareilly case once again highlights how organised groups are attempting to misuse the GST framework by creating shell entities and paper transactions. Over the past few years, similar frauds have been detected across Uttar Pradesh and other states, prompting enforcement agencies to intensify surveillance.
Experts point out that tighter monitoring of digital trails, banking transactions and e-way bill data has significantly improved detection of such crimes. Increased coordination between tax authorities and law-enforcement agencies is also proving crucial in dismantling complex GST fraud networks.
The Crime Branch has indicated that further arrests are likely in the coming days. Investigators are working to identify all beneficiaries, middlemen and enablers involved in the racket, with the aim of dismantling the entire network and recovering lost revenue.
As the investigation widens, the case is being seen as a strong signal that enforcement agencies are stepping up action against GST fraud, particularly those involving fake firms and organised, cross-state syndicates.
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.
