Karnataka GST Scam Uncovered: Rs 1,464 Crore Fraud Involving Fake Invoices Across States

The Enforcement Wing (South Zone) of the Karnataka Commercial Taxes Department has exposed a massive tax fraud worth Rs. 1,464 crore involving fake billing between businesses in Karnataka and Tamil Nadu.

The group behind this scam created fake bills for construction materials such as cement, iron, steel, and other building supplies. These materials were shown as being bought and sold on paper, but in reality, there was no actual supply.

By using these fake bills, the businesses illegally claimed Input Tax Credit (ITC), which is a tax benefit meant only for genuine purchases. The department has found that around Rs. 355 crore worth of tax credit was wrongly claimed.

The team detected the scam using advanced GST analytics systems and the department’s in-house Non-Genuine Taxpayers (NGTP) module. Analysis of IP addresses revealed suspicious activities. Based on such findings, the department conducted searches at several locations including both Karnataka and Tamil Nadu.

The investigation exposed that the accused obtained several GST registrations using fake and false documents, including online stamp papers, bogus rent agreements, and forged signatures of landlords and tenants.

Using them, the accused issued fake invoices and showed false transactions between the companies to wrongly claim input tax credit (ITC). After illegally availing large tax benefits, the accused cancelled the GST registrations of these firms to avoid detection and escape audits.

The Enforcement Wing carried out raids in several cities, including Bengaluru, Chennai, Vellore, and Pernampattu. During these raids, they seized 24 mobile phones, 51 SIM cards, two pen drives, and several bank documents, as well as company seals. Officials believe these items will help trace the network and money involved in the scam.

Four main people have been arrested. Two brothers from Tamil Nadu, Irbaz Ahmed and Nafeez Ahmed, had set up fake companies like Tryon Traders, Wonder Traders, Royal Traders, and Galaxy Enterprises. The other two, Edda Pratap and Smt. Revathi from Bengaluru, had created companies including Power Steel and Cement, PR Construction, SV Traders, and SRS Cement Steel Traders.

All four were produced before the Special Court for Economic Offences in Bengaluru, which sent them to judicial custody for 14 days.