Authorities have uncovered an alleged GST evasion racket in Uttar Pradesh's Moradabad involving fake firms, bogus invoices and fraudulent claims of Input Tax Credit (ITC). Two individuals from Meerut have been arrested after investigators found that a scrap trading company linked to the case allegedly existed only on paper.
The accused, identified as Md. Faizal and Shahnavaz, are suspected of operating through a firm named National Traders, which was shown as being engaged in scrap trading activities during the financial year 2022-23.
Paper Firm Allegedly Used for Tax Fraud
According to officials, National Traders reported a business turnover of nearly ₹4.10 crore during the period. Based on these figures, a GST liability of ₹63.94 lakh was declared. However, investigators found that the tax amount was never deposited with the authorities.
During verification, officials reportedly discovered that no genuine business activity was taking place at the registered address of the company. Investigators concluded that the entity had allegedly been created to facilitate fake billing and tax evasion.
In addition to the unpaid tax amount, authorities had imposed a penalty exceeding ₹56 lakh, which also remains outstanding.
Bogus Invoices Used to Claim Input Tax Credit
The investigation began after a complaint was filed by officials from the State Tax Department earlier this year. Authorities subsequently relied on technical surveillance, bank transaction analysis and mobile tracking to trace the individuals allegedly involved in the network.
During questioning, the arrested accused reportedly admitted to generating invoices without any actual supply of goods. Investigators believe these documents were used to fraudulently claim Input Tax Credit and later convert the gains into cash through illegal channels.
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Wider Network Under Investigation
Officials suspect that the operation may have been part of a larger syndicate extending beyond Uttar Pradesh. Investigators have identified Ishaan Malik of Meerut as a suspected mastermind and are examining possible links with individuals operating in other regions, including Delhi.
Authorities believe different members of the network handled separate responsibilities such as firm registration, invoice generation, banking operations and fund movement.
Search operations are continuing to locate other individuals allegedly associated with the racket. Investigators are also reviewing additional financial records to determine the overall extent of the fraud and identify all beneficiaries connected to the scheme.