GST ITC fraud has once again taken centre stage as Delhi South CGST officials uncovered a scam worth ₹7.85 crore. The case involves the wrongful availing and passing of fake input tax credit (ITC) using bogus firms.
What Happened in the ₹7.85 Crore GST ITC Scam?
According to the official press release by CBIC, the Delhi South CGST Commissionerate detected fraudulent ITC claims by entities that existed only on paper.
- The accused created multiple fake GST registrations
- The CA played a key role in managing these fake entities and issuing invoices
The operation was part of a targeted drive by the GST department to detect non-compliant taxpayers using data analytics and risk assessment tools.
Legal Basis for Action
The action was initiated under the provisions of:
- Section 132 of the CGST Act, 2017 – dealing with offences involving fake invoices, ITC fraud, and wrongful tax evasion
- Section 69 – allowing for arrest in cases of cognizable and non-bailable offences
How Fake ITC Scams Typically Operate
| Step | Modus Operandi |
|---|---|
| 1 | Dummy firms are registered using forged documents |
| 2 | Invoices are issued without real supply of goods/services |
| 3 | ITC is claimed by recipient firms |
| 4 | CA or consultant facilitates compliance filings and bank transactions |
| 5 | Money is layered and withdrawn in cash or transferred to shell accounts |
Expert Tip: How to Stay Compliant and Avoid Risks
✔️ Always verify the GSTINs of your vendors on https://www.gst.gov.in
✔️ Use GSTR-2B reconciliation to match your ITC
✔️ Avoid associating with firms offering unusually high ITC or cash-back arrangements
✔️ Consult a registered tax professional, not unverified agents
From the Efiletax desk: With increased scrutiny and arrests, even indirect involvement in ITC scams can lead to liability.
Implications for CA Firms and Taxpayers
- Chartered Accountants are under scanner, especially if found aiding in bogus registrations or filings
- Businesses may face reversal of ITC, interest, penalties, and even prosecution
Recent Government Crackdown: A Pattern
This isn’t an isolated incident. Recent GST frauds detected include:
- ₹11.50 Cr fake ITC scam in Maharashtra (April 2025)
- ₹9.2 Cr fraud via pan-India circular trading (March 2025)
CBIC and GSTN are increasingly using AI-driven analytics to flag suspicious activities.
FAQs
Q1. What is fake ITC in GST?
Fake ITC refers to availing input tax credit based on invoices without actual receipt of goods or services.
Q2. Can a CA be arrested under GST?
Yes, under Section 132, a CA can be arrested if involved in wilful tax fraud or abetment.
Q3. What are the penalties for claiming fake ITC?
Penalties include reversal of credit, interest, fine up to ₹10,000 or 100% of tax, and jail term in serious cases.
Summary
Delhi South CGST unearthed a ₹7.85 crore GST ITC fraud involving fake firms and invoices. The case highlights growing government crackdown on GST frauds under Sections 69 and 132 of the CGST Act.