Mastermind Behind ₹7.85 Crore GST Fraud Busted in Delhi: Fake GSTINs and Circular Trading Exposed
1. The GST ITC Framework and Vulnerabilities
The Goods and Services Tax (GST) regime allows registered taxpayers to claim Input Tax Credit (ITC) on taxes paid for purchases, reducing their overall liability. While this mechanism is vital for preventing tax-on-tax cascading, it can also be exploited through fraudulent registrations and circular trading—practices expressly prohibited under the CGST Act Sections 132(1)(b) and (c) criminalise the issuance of invoices without actual supplies and the wrongful availing or utilization of ITC based on such invoices.
2. Modus Operandi: Misuse of 80+ GSTINs
Investigators discovered the accused controlled over 80 active GSTINs, all linked to his personal email addresses and contact numbers, with a majority concentrated in Palam and Dwarka. A subset of 31 GSTINs formed a circular-trading network, wherein invoices were issued and counter-invoices accepted internally, creating the illusion of legitimate supply chains. No actual goods or services ever changed hands in these transactions.
3. Investigation and Search Operations
Between May 5–7, 2025, the Delhi South CGST team conducted coordinated searches at 12 premises linked to the accused’s network. Officials found that several purported firms did not exist on the ground, confirming they were shell entities created solely for fraudulent ITC claims. Electronic devices—including computers, mobile phones, and storage media—were seized for forensic analysis, and statements were recorded from multiple individuals who admitted they had surrendered their GST credentials to the chartered accountant.
4. Legal Charges and Judicial Custody
The chartered accountant was formally arrested under Section 69(1) of the CGST Act, 2017, for facilitating the fraudulent claims, and produced before the Duty Magistrate on May 7, 2025. He faces non-bailable charges under Section 132(5) read with 132(1)(i), carrying punishments of up to five years’ imprisonment and heavy fines. The magistrate remanded him to judicial custody for 14 days, until May 21, 2025.
5. Broader Implications and Ongoing Probes
This case underscores persistent vulnerabilities in the GST compliance ecosystem—namely, over-reliance on professionals to manage filings and insufficient real-time verification of newly registered entities. The Finance Ministry has stated that investigations are continuing to map the full extent of the fraud ring and identify all beneficiaries of the illicit credits.