Two companies that allegedly existed only on paper showed nearly ₹84 crore in business transactions and claimed more than ₹14 crore in tax credit before State Tax officials discovered that neither firm was operating from its registered address.
Separate police cases have now been registered at Bajaria and Chamanganj police stations in Kanpur after departmental verification raised suspicions over the documents, addresses and GST transactions linked to the firms.
The two entities, M/s Balaji Enterprises and M/s New Trend Enterprises, together allegedly reported transactions worth around ₹83.97 crore and claimed approximately ₹14.16 crore in Input Tax Credit, or ITC.
Investigators are now trying to establish who actually operated the firms, which businesses traded with them on paper and whether the companies formed part of a larger network designed to generate fake GST credit.
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₹63 Crore Business Shown From a Firm That Wasn’t There
Balaji Enterprises was registered at an address in the Ram Bagh area under Bajaria police station.
But when State Tax officials physically inspected the location, they allegedly found no company operating there.
Investigators subsequently examined the GST registration and supporting documents. According to the department’s complaint, Alok Dubey, a resident of Bhopal, allegedly obtained the registration using forged documents.
Despite the firm allegedly being absent from its declared premises, departmental records showed outward supplies of around ₹63.13 crore.
Against these transactions, Balaji Enterprises allegedly claimed approximately ₹11.50 crore in ITC.
A similar pattern emerged in Chamanganj.
M/s New Trend Enterprises was registered at an address in Humayun Bagh. Officials conducting physical verification reportedly found neither an office nor evidence of business activity there.
The firm had nevertheless shown transactions of around ₹20.83 crore and allegedly claimed approximately ₹2.65 crore in ITC.
State Tax officials have now asked police to investigate the suspected use of forged documents and fictitious transactions in both cases.
What Is Input Tax Credit and How Can It Be Abused?
Input Tax Credit, or ITC, is one of the basic mechanisms behind GST.
Suppose a furniture manufacturer buys wood and pays ₹18,000 in GST to its supplier. Later, when the manufacturer sells furniture and owes ₹30,000 in GST, it can generally deduct the ₹18,000 already paid and deposit the remaining ₹12,000.
That deduction is input tax credit.
The system prevents tax from repeatedly accumulating at every stage of the supply chain.
The fraud begins when businesses create invoices for goods that were never actually supplied.
A bogus company can issue an invoice showing a ₹10 lakh sale even though no goods moved at all. The buyer may then attempt to use the GST mentioned on that invoice as credit against its own tax liability.
This is why investigators refer to such activity as fake invoicing or paper transactions.
The invoice exists. The GST portal may record a transaction. But the underlying business activity may never have happened.
Under Section 16 of the CGST Act, eligibility for ITC is tied to statutory conditions, including the receipt of goods or services. Courts dealing with bogus-firm investigations have repeatedly examined cases where invoices were allegedly generated without any actual supply.
Kanpur Has Already Uncovered Much Larger GST Networks
The two latest FIRs are not emerging in isolation.
In March 2026, Kanpur Police said they had uncovered an organised GST fraud network involving transactions of nearly ₹250 crore.
Investigators alleged that identity documents belonging to students, e-rickshaw drivers, daily-wage workers and other unsuspecting people were used to create shell companies. Fake rent agreements and utility documents were allegedly used to secure GST registrations.
Police identified 38 suspected fraudulent companies and froze around ₹1.5 crore linked to three firms.
The alleged operators generated invoices and e-way bills without actual movement of goods, allowing fraudulent tax credits to circulate through interconnected entities.
Another Kanpur investigation reported in February led to seven arrests in an alleged ₹7 crore GST fraud involving fake firms and invoices. Police said documents belonging to unsuspecting individuals had again been misused to obtain GST registrations.
The pattern has appeared repeatedly.
In a separate 2025 Kanpur investigation, authorities alleged that fraudulent invoices worth around ₹150 crore were generated in the iron-scrap trade, enabling approximately ₹27 crore in ITC claims.
Investigators Will Now Follow the Invoice Chain
Finding that a business does not exist at its registered address is only the beginning of such an investigation.
Officials must now trace the companies shown as suppliers and buyers of Balaji Enterprises and New Trend Enterprises.
That could reveal whether genuine businesses received tax credit generated by the two firms or whether the transactions moved repeatedly between other suspected shell entities.
Bank accounts, GST returns, e-way bills, mobile numbers, IP addresses and documents used during registration can all become important.
A Delhi High Court case involving another major GST network showed how investigators linked more than 100 suspected fake firms through common mobile numbers, email addresses, IP addresses and overlapping operators. The investigation alleged that invoices circulated without actual supply of goods to create fraudulent ITC.
The Kanpur police investigations will now have to establish whether the ₹83.97 crore reflected genuine trade, wholly fictitious transactions or a mixture of both.
They will also have to identify who ultimately benefited from the ₹14.16 crore in alleged tax credit.
For now, the departmental complaints represent allegations. The criminal investigation will determine the responsibility of the individuals and businesses connected to the transactions.
What this means for you: Business owners should independently verify suppliers before claiming GST credit, especially when dealing with newly registered firms. If an invoice comes from a non-existent supplier, the recipient can face scrutiny even when the apparent transaction is recorded on the GST portal.
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