BENGALURU — What began as scrutiny of a single suspicious Goods and Services Tax registration has widened into one of the region’s most significant recent crackdowns on tax fraud.
Officials with the Directorate General of GST Intelligence (DGGI), operating through its Belagavi zonal unit, said they unearthed a fake input tax credit racket valued at approximately ₹593 crore. The investigation, according to a statement from the agency, led to multiple searches at premises linked to Star Tax Consultant in Bengaluru.
The searches, officials said, exposed what they described as a well-organized network engaged in issuing invoices without any actual supply of goods or services. These documents, investigators allege, enabled the wrongful availment and passing on of input tax credit amounting to nearly ₹235 crore.
At the center of the case is Mohammad Saifullah, a registered GST practitioner whom officials have identified as the alleged mastermind of the operation.
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A Network of Shell Entities
Preliminary findings indicate that numerous GST registrations were operated solely for generating bogus invoices and e-way bills. Authorities allege that these registrations, though formally valid, were tied to shell entities with no genuine business activity.
Investigators said that Saifullah actively managed multiple non-existent and shell GST Identification Numbers (GSTINs). Through them, he is accused of orchestrating the issuance of fake invoices and electronic way bills — mandatory documents used to track the movement of goods — in exchange for a commission calculated as a percentage of the invoice value.
According to the DGGI’s statement, the accused systematically used online accounting software to record and monitor transactions routed through several such entities. These transactions, officials said, created the appearance of legitimate trade while facilitating fraudulent claims of input tax credit by ultimate beneficiaries.
The alleged scheme relied on the mechanics of India’s GST framework, under which businesses can claim credit for taxes paid on inputs. By fabricating invoices without any underlying supply of goods or services, investigators contend, the network enabled recipients to reduce their tax liabilities unlawfully.
Arrest and Judicial Proceedings
On February 24, Saifullah was arrested in Bengaluru under Section 69 of the Central Goods and Services Tax Act, 2017, which empowers authorities to arrest individuals suspected of certain offenses under the law.
Officials said that when confronted with incriminating evidence, he admitted to his role in the fraudulent scheme. Following his arrest, Saifullah was produced before a special court for economic offenses in Bengaluru. The court granted transit remand to facilitate his transfer to Belagavi, where the investigation is being conducted.
He was subsequently presented before the Judicial Magistrate First Class-4 court in Belagavi, which remanded him to judicial custody.
A Wider Investigation Underway
Authorities have described the case as ongoing. A probe is underway to identify additional beneficiaries and to quantify the full extent of the alleged fraud. Officials said they are examining the trail of transactions routed through the shell entities and assessing the scope of wrongful tax credits claimed.
The DGGI has not disclosed how many entities are under scrutiny or whether further arrests are anticipated. For now, the investigation centers on reconstructing the network’s operations and tracing the financial flows that investigators believe underpinned one of the region’s largest recent GST fraud cases.
