The State Goods and Services Tax (SGST) department has uncovered an alleged fake iron scrap trading network in Kanpur and Kanpur Dehat involving bogus transactions worth ₹262 crore and suspected fraudulent Input Tax Credit (ITC) claims of ₹47.05 crore.
The enforcement action involved 15 SGST teams carrying out simultaneous inspections at seven business premises registered under different trading entities. Authorities said approximately ₹10 crore in suspected fraudulent ITC has been blocked on the GST portal to prevent further revenue loss.
Raids Reveal Alleged Paper-Only Businesses
The inspections were conducted under the supervision of Additional Commissioners Sanya Chhabra, Kumar Anand and Prashant Kumar.
According to the tax department, several registered businesses could not be found at their declared addresses. In some cases, people living or working at the locations reportedly told officials that they had no knowledge of the GST registrations associated with those addresses.
Authorities have initiated proceedings to cancel the registrations of the entities found to be non-existent or involved in suspected irregularities. FIRs are also being lodged against individuals allegedly connected to the network.
The department said it intends to continue targeted enforcement against organised tax evasion networks.
Kanpur Inspections Find Multiple Dummy Entities
At Nayapurwa, M-Block, on Kidwai Nagar Bypass Road, officials inspected the declared premises of M/s Balaji Traders but reportedly found that the business did not exist at the location.
The firm had declared supplies worth ₹46.22 crore in its GST returns and allegedly passed on ₹8.32 crore in ITC. Authorities said the claimed credit was subsequently blocked on the GST portal.
At Plot No. 12 in Koyla Nagar, officials looking for M/s Devkar Enterprises instead found another business operating as M/s Shri Balaji Coal Company. An employee identified as Shashikant reportedly told the inspection team that he was unaware of Devkar Enterprises or its stated proprietor.
Another inspection at Swarn Jayanti Road involved M/s Verma Traders. Officials reportedly found a small shop at the declared address, while GST records showed turnover of ₹12.94 crore and approximately ₹1.38 crore in the firm's electronic credit ledger. The department said ₹2.33 crore in ITC had been claimed or passed on and was blocked.
More Firms Allegedly Absent From Declared Addresses
The inspection at Ghantaghar for M/s Balaji Enterprises reportedly found no physical establishment corresponding to the registered business.
GST records showed the entity had declared supplies worth ₹76.99 crore and allegedly passed on ₹13.85 crore in ITC.
At Cooperganj, M/s Sunil Trading Company was also reportedly found to be non-existent at its registered location. The entity had declared sales of ₹27 crore and allegedly routed ₹4.80 crore in fraudulent ITC.
These figures are based on the tax department's enforcement findings and remain subject to further investigation and proceedings.
For businesses seeking to maintain accurate GST records and reduce compliance risks, GST Return Filing is particularly relevant where return reporting and Input Tax Credit claims are involved.
Alleged Rural Network in Kanpur Dehat
The enforcement operation also extended into rural areas of Kanpur Dehat, where authorities suspect that additional entities were being used to generate fictitious transactions.
At 40/130 Lalepur on Fatehpur Station Road in Lalpur, officials reportedly found no M/s BM Traders at its registered address. The phone number listed on the GST portal was also reportedly switched off.
Records showed the firm had declared transactions worth ₹28.88 crore and allegedly passed on ₹5.20 crore in ITC.
In Umran, Akbarpur, inspectors visited the registered location of M/s Pooja Udyog and reportedly found no genuine commercial establishment operating there.
According to the department's records, the entity had declared supplies worth ₹70 crore and allegedly passed on ₹12.55 crore in bogus ITC.
Tax Department Steps Up Enforcement
The Kanpur operation highlights the use of physical verification alongside GST data to identify businesses whose reported transactions may not correspond with their actual operations.
Authorities have begun steps against the entities identified during the inspections, including possible cancellation of registrations and criminal proceedings against alleged operators.
The investigation is expected to focus on how the entities were created, who controlled the registrations and bank accounts, and how the alleged transactions were used to generate and transfer Input Tax Credit.
The allegations and enforcement findings will be subject to the applicable legal and tax proceedings.