Rs 1,464-crore interstate fake invoice cartel busted
The Enforcement Wing (South Zone) of the Commercial Taxes Department, Government of Karnataka, has unearthed and dismantled a major interstate fake invoicing cartel operating across Karnataka and Tamil Nadu, involving fraudulent transactions amounting to Rs 1,464 crore.
The racket primarily dealt with cement, iron and steel, and other building materials, and was used to generate fake inward and outward supply invoices. Officials said the cartel wrongfully availed and passed on the Input Tax Credit (ITC) of approximately Rs 355 crore without any corresponding movement of goods, causing significant loss to the government revenue.
The detection was made possible through advanced GST system analytics. The department’s in-house developed Non-Genuine Taxpayer (NGTP) module, along with IP address trail analysis from the GST back office, identified abnormal invoicing patterns and circular ITC flows among multiple entities. These red flags led to focused, intelligence-driven and coordinated enforcement action across several locations in both states. Investigations revealed that numerous GST registrations had been fraudulently obtained
using forged and fabricated documents. These included stamp papers sourced from online platforms, fake rental agreements, forged signatures of landlords and tenants, false tax-paid receipts and forged notarial attestations. Such registrations were used to create layers of shell entities that issued and circulated fake invoices while giving an appearance of legitimate commercial activity.
Officials also observed that after availing and passing on substantial ITC, several entities voluntarily cancelled their GST registrations, apparently to obscure audit trails and evade scrutiny. The Enforcement Wing noted this as an emerging modus operandi, wherein cancellation of registration itself is misused to camouflage large-scale tax fraud, and said systemic safeguards are being examined to counter this risk. Coordinated search and seizure operations were conducted simultaneously in Bengaluru, Chennai, Vellore and Pernampattu.
These materials are expected to yield crucial digital, financial and documentary evidence regarding the scale and interstate spread of the cartel. In a first-of-its-kind coordinated interstate operation by the Commercial Taxes Department, four key accused were arrested with the active cooperation of the Commercial Taxes Department, Government of Tamil Nadu. Two brothers from Tamil Nadu, Sri Irbaz Ahmed and Sri Nafiz Ahmed, were apprehended from Pernampattu for allegedly floating fake firms such as Trion Traders, Wonder Traders, Royal Traders and Galaxy Enterprises.
Sri Eddala Pratap and Revati, who allegedly floated shell entities including Power Steel and Cement, PR Construction, SV Traders and SRS Cement Steel Traders, were arrested in Bengaluru. All four accused were produced before the Hon’ble Special Court for Economic Offences, Bengaluru, and have been remanded to judicial custody for 14 days.
