DGGI Busts ₹1,825 Cr ITC Fraud, Key Accused Arrested

Investigations revealed a 'well-structured arrangement' designed to fraudulently claim ITC and encash it through refund claims on zero-rated supplies or exports, as reported by the finance ministry. Such schemes typically involve the use of fake invoices to claim tax credits on raw materials, which are later refunded when exporters and domestic firms are unable to fully offset input taxes against output liabilities. The accused controlled a network of dummy firms operated through employees and close associates using borrowed 'know your customer' (KYC) documents.

According to the ministry statement, these dummy entities were found to be non-functional or lacking infrastructure, manpower and genuine business activity at their declared locations. The dummy proprietors/directors were merely name lenders and were compensated with fixed monthly cash payments. All operational activities including GST registration, invoice generation, banking operations, filing of returns and submission of refund claims were handled centrally by the masterminds.

The fraud involved generating fake purchase invoices without any actual movement of goods, with high-value tobacco products shown in invoices to create substantial ITC. This was then routed through multiple intermediary firms to form layered transaction chains, enabling the transfer of ITC across entities through paper transactions. Investigators found that low-value tobacco, inferior smoking mixtures and other tobacco products were procured locally at nominal prices, often without invoices, and then mis-declared as high-value products for inflated refund claims.