₹2,166 Crore GST ITC Irregularities Detected in Uttar Pradesh Crackdown

Authorities in Uttar Pradesh have uncovered ₹2,166 crore worth of input tax credit (ITC) irregularities during a large-scale enforcement drive against bogus firms suspected of engaging in tax evasion.

The State Tax Department confirmed that 345 First Information Reports (FIRs) have been registered in connection with the case, while 86 individuals have been arrested as part of the investigation.

Officials say the action forms part of an intensified compliance campaign aimed at strengthening tax enforcement and improving revenue collection across the state.

Revenue Collection Shows Growth

According to the State Tax Department, the ongoing trader dialogue campaign has contributed to improved tax compliance and increased revenue collections.

In February 2026, the state reported tax revenue of ₹9,731 crore, which is approximately ₹352 crore higher than the same month in the previous year.

For the current financial year, total revenue collection has reached ₹103,779 crore, reflecting an increase of about ₹402 crore compared with the corresponding period last year.

Officials said these improvements are partly due to expanded digital monitoring and stronger compliance measures under the GST 2.0 framework.

Digital Monitoring Strengthened Under GST 2.0

The department has expanded its digital tax compliance system by enhancing tools such as:

• E-invoice monitoring systems

• E-way bill tracking mechanisms

• Online return filing platforms

In addition, an artificial intelligence-based scrutiny system has been deployed to analyse large volumes of transaction data.

Authorities reported that the system examined transactions worth more than ₹48,000 crore involving approximately 1.59 lakh taxpayers.

The analysis helped investigators detect suspicious patterns linked to networks of fake firms attempting to claim fraudulent input tax credit.

Large Network of Bogus Firms Identified

During enforcement operations, officials uncovered a network of companies that allegedly existed only on paper and were involved in fake billing schemes designed to claim fraudulent GST credits.

Investigators believe these firms were used to create artificial transactions, allowing certain businesses to claim input tax credits without actual economic activity.

As part of the crackdown:

• 345 FIRs were registered

• 86 suspects were arrested

• ₹137 crore worth of ITC was blocked

Authorities said the investigations involved coordinated efforts between state tax enforcement teams and central agencies.

Significant Recovery From Enforcement Actions

Officials reported that enforcement measures have also resulted in substantial financial recoveries.

So far, ₹1,642 crore has been deposited into the government treasury as part of the enforcement campaign.

Combined recoveries under GST and VAT have reached ₹3,117 crore, which is considerably higher compared to the previous year.

Of this amount:

• ₹2,406 crore was recovered under GST

• ₹711 crore was recovered under VAT

Authorities say further recoveries may occur as investigations continue.

Continuous Monitoring of Suspicious Transactions

The State Tax Department has instructed special monitoring teams to continue tracking suspicious financial activities.

Officials said digital monitoring systems will remain active to identify irregularities in tax filings and detect potential fraud schemes involving fake invoices or shell companies.

Tax experts note that improved digital surveillance, combined with awareness initiatives such as trader dialogue programmes, can significantly strengthen tax compliance systems.

Businesses operating in complex tax environments often rely on professional auditing services in India to maintain accurate financial reporting and ensure regulatory compliance with GST regulations.

Enforcement Campaign to Continue

Department officials have emphasized that strict action will continue against firms and individuals involved in tax evasion.

Authorities have also encouraged traders to follow legitimate business practices and report suspicious transactions to the department.

With expanded digital tools and stronger enforcement mechanisms, officials believe the campaign against bogus firms will further improve compliance and protect government revenues.