Karnataka busts Rs 1,464 crore interstate fake invoicing cartel, arrests four people

Bengaluru: The Enforcement Wing (South Zone) of the Karnataka Commercial Taxes Department has dismantled a major interstate fake invoicing cartel operating across Karnataka and Tamil Nadu, involving cement, iron and steel, and other construction materials.

Officials said the racket generated fraudulent inward and outward supply transactions worth Rs 1,464 crore, leading to the wrongful availment and passing on of Input Tax Credit (ITC) of about Rs 355 crore without any actual movement of goods.

The fraud was detected using advanced GST analytics. The department’s in-house Non-Genuine Taxpayer (NGTP) module, along with IP address trails from the GST back office, flagged abnormal invoicing patterns and circular ITC flows across multiple entities. This led to focused and coordinated enforcement action at several locations.

Investigations revealed that multiple GST registrations were obtained using forged documents, including stamp papers sourced online, fabricated rental agreements, forged signatures of landlords and tenants, fake tax-paid receipts and forged notarial attestations.

These registrations were used to create layers of shell entities that issued and circulated fake invoices while presenting an appearance of legitimate commercial activity.

After availing and passing on large amounts of ITC, several entities voluntarily cancelled their GST registrations, apparently to erase audit trails and evade scrutiny. Officials said this highlights an emerging trend of misusing registration cancellation to conceal large-scale tax fraud, prompting a review of systemic safeguards.

Coordinated search and seizure operations were carried out simultaneously in Bengaluru, Chennai, Vellore and Pernampattu, during which 24 mobile phones, 51 SIM cards, two pen drives, bank statements and multiple rubber stamps of various firms were seized. These are expected to yield further digital and financial evidence on the cartel’s scale and interstate spread.

In a first-of-its-kind coordinated interstate operation, four key accused were arrested with the support of Tamil Nadu’s Commercial Tax authorities. Two brothers, Irbaz Ahmed and Nafiz Ahmed, were arrested from Pernampattu, while Eddala Pratap and Revati were arrested from Bengaluru.

All four were produced before the Special Court for Economic Offences, Bengaluru, and remanded to judicial custody for 14 days.