Ranchi: The Enforcement Directorate has arrested two people in an alleged ₹734 crore fake Goods and Services Tax Input Tax Credit fraud involving a network of 135 shell companies and bogus invoices worth more than ₹5,000 crore.
The ED’s Ranchi Zonal Office arrested Gyaan Chand Jaiswal alias Babloo Jaiswal and Raaj Jaiswal following searches conducted on September 30.
Both were produced before a Special PMLA Court in Ranchi on October 1 and remanded to judicial custody.
The agency alleges that the wider syndicate created companies that existed largely on paper, issued invoices without any real supply of goods or services and then generated fake Input Tax Credit that was sold to beneficiary firms for a commission.
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How the ₹734 Crore Fake ITC Network Allegedly Worked
Input Tax Credit, or ITC, allows a GST-registered business to reduce the tax it owes on sales by claiming credit for GST already paid on purchases.
For example, if a company legitimately pays GST while buying raw materials, it can generally use that tax as credit against its GST liability when it sells the finished product.
The ED alleges that the network exploited this system without any genuine purchase or supply taking place.
According to the agency, 135 shell companies were created across Jharkhand, West Bengal and Delhi.
These entities allegedly issued bogus invoices worth more than ₹5,000 crore.
Those invoices were then used to generate and pass on fake ITC worth over ₹734 crore to businesses that wanted to reduce their actual GST liabilities.
The fake credit was allegedly sold for a commission.
In effect, beneficiary companies could use tax credit that had never arisen from a genuine commercial transaction.
Latest Arrests Focus on ₹54.33 Crore Trail
The latest phase of the investigation focuses on entities allegedly linked to Gyaan Chand Jaiswal and Raaj Jaiswal.
The ED says companies were incorporated in their names, in the names of family members and even in the names of employees.
Entities identified by the agency include Maa Sharda Endeavours Pvt. Ltd., Makers Casting Pvt. Ltd. and Kedarnath Trexim Pvt. Ltd.
Another entity, Jai Bhole Enterprises, was allegedly incorporated in the name of an employee.
The ED alleges that fake ITC worth about ₹54.33 crore was routed through these entities.
According to investigators, the money trail was layered through multiple transactions before reaching personal accounts of the accused, their relatives and associated entities.
The agency has treated this amount as alleged proceeds of crime for the purposes of its money laundering investigation.
These allegations have not yet been established in court.
ED Suspects Proceeds Were Used for Businesses and Property Purchases
Investigators are now examining what happened to the money after it moved through the companies and accounts under scrutiny.
The ED suspects that part of the alleged proceeds may have been used in business activities and for acquiring movable and immovable properties.
Tracing such assets is important in a PMLA investigation because property allegedly purchased with proceeds of crime can be provisionally attached while proceedings continue.
The agency has already issued two provisional attachment orders covering properties worth more than ₹20 crore in the wider case.
Earlier attachment action included properties worth ₹5.29 crore linked to one alleged syndicate head and another ₹15.41 crore in immovable properties connected with Amit Gupta and his associates.
Searches Conducted in Jamshedpur and Kolkata
The September 30 arrests followed searches at four premises linked to Gyaan Chand Jaiswal, chartered accountant Sanjay Parekh and others in Jamshedpur and Kolkata.
The ED said documents and digital devices were seized during the operation.
Investigators are examining financial records, company documents, account trails and digital evidence to determine how the alleged fake ITC was created, distributed and converted into money.
The agency had also conducted searches in May and August 2025 at locations in Kolkata, Jamshedpur, Ranchi and other places.
Those earlier operations resulted in the seizure of documents and digital devices, as well as cash seizure and freezing of bank balances totalling nearly ₹70 lakh.
Four Accused Were Arrested Earlier
The fake ITC investigation has been underway for more than a year.
In May 2025, the ED arrested Shiva Kumar Deora, Mohit Deora, Amit Kumar Gupta and Amit Agarwal alias Vicky Bhalotia.
The agency later filed a prosecution complaint against them before the Special PMLA Court in Ranchi.
Its July 2025 press release described the four as alleged masterminds of the 135-company network.
Three of the earlier accused are currently in judicial custody, according to the ED.
The prosecution complaint is under trial.
The latest arrests indicate that the agency is now extending its investigation beyond the original alleged masterminds to businesses and individuals suspected of benefiting from or helping route the fake credit.
What Is a Fake ITC Fraud?
A fake ITC fraud generally involves creating invoices that show a purchase or sale even though no genuine goods or services changed hands.
Those invoices generate a tax credit on paper.
That credit can then be used by another company to reduce the GST it genuinely owes.
The government therefore loses revenue even though no real tax-generating transaction occurred.
Large networks can make the fraud harder to detect by routing invoices through several shell companies before the credit reaches the final beneficiary.
The ED alleges that the syndicate in this case used precisely such a structure, with 135 companies and invoice values exceeding ₹5,000 crore.
Investigation Continues Into Beneficiary Firms
The ED is continuing to identify companies that allegedly purchased or used the fraudulent ITC.
Investigators are also examining commissions paid to the operators of the network and the movement of money after the fake credit was sold.
In a related attachment order issued in September 2025, the ED estimated that the broader syndicate earned around ₹67 crore in commissions from the operation.
Further arrests or attachment action could follow if investigators establish additional financial links.
The people arrested in the case have not been convicted, and all allegations remain subject to judicial proceedings.
What this means for you
Businesses should verify suppliers, invoices and actual movement of goods before claiming GST Input Tax Credit. Using credit generated from fictitious transactions can expose companies not only to tax recovery and penalties but also to criminal and money laundering investigations.
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