Gurugram: The Anti-Evasion Wing of the Central Goods and Services Tax (CGST) Commissionerate, Gurugram, has uncovered an alleged ₹200 crore Input Tax Credit (ITC) fraud and arrested four individuals, including two co-founders of a Gurugram-based automobile service startup and two chartered accountants. The accused were produced before a duty magistrate and remanded to 14 days of judicial custody, while investigators continue to examine the financial trail and identify additional beneficiaries linked to the alleged tax evasion network.
According to CGST officials, the fraud was orchestrated through a sophisticated web of nearly 30 shell companies that allegedly issued fake tax invoices without any actual supply of goods or payment of GST. These invoices were subsequently used to fraudulently claim Input Tax Credit, resulting in an estimated loss of around ₹200 crore to the government exchequer.
Officials said the investigation began after intelligence inputs were received from Customs authorities. The probe continued for nearly six to eight months, during which investigators scrutinised financial transactions, analysed company records and tracked the movement of funds across multiple business entities. The inquiry eventually revealed a complex network of fictitious firms allegedly created solely to facilitate invoice routing and conceal financial transactions.
Investigators alleged that although invoices were generated and circulated on paper, there was neither any genuine movement of goods nor any corresponding GST deposited with the government. Authorities believe the shell entities existed only to create an artificial chain of transactions, enabling fraudulent claims of tax credits while masking the actual flow of funds.
According to investigators, the two principal accused were former founding directors of an on-demand automobile servicing and battery assistance startup established during 2016-17. Preliminary findings suggest that the alleged fraudulent activities began after 2021, when the accused allegedly started creating shell entities and generating fake invoices to unlawfully claim GST benefits.
Officials further alleged that the accused used their financial and professional expertise to design a layered structure capable of avoiding immediate detection. Investigators believe the two chartered accountants played a significant role in establishing and operating the alleged network by structuring shell companies, maintaining financial records and facilitating invoice transactions across multiple entities.
The accused were summoned to appear before CGST officials on Saturday for questioning. During interrogation, investigators confronted them with documentary evidence, digital financial records and transaction data collected during the investigation. Based on the available material, the four individuals were arrested under the provisions of the Central Goods and Services Tax Act.
Authorities said no financial recovery has been made so far, and further investigation is underway to identify additional companies and individuals who may have benefited from the alleged fraudulent Input Tax Credit claims. Officials are also tracing the movement of funds through various bank accounts and business entities to determine the complete extent of the network.
Another significant aspect under investigation is whether the allegedly inflated financial records were intended to artificially enhance the startup’s valuation before a proposed Initial Public Offering (IPO) or a strategic stake sale. Investigators are examining whether fabricated revenues and paper transactions were used to project stronger financial performance and attract investors by creating a misleading picture of the company’s business operations.
Tax experts note that fake Input Tax Credit fraud remains one of the most significant challenges under the GST regime, with shell companies frequently being used to generate fictitious invoices that enable fraudulent tax claims without genuine commercial activity. Such schemes not only result in substantial revenue losses for the government but also distort fair market competition and undermine the integrity of the indirect taxation system.
The investigation is continuing, with CGST officials analysing digital evidence, financial records and corporate documentation to identify the full network of shell companies, beneficiaries and facilitators involved in the alleged ₹200 crore GST fraud. Authorities have indicated that further arrests and recovery proceedings may follow as the probe progresses and additional evidence emerges.
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.
