GST ITC Scam in Ludhiana The Dark Side of Fake Firms
The focus keyphrase GST ITC scam brings into light one of the largest tax frauds in Punjab’s recent history a ₹157 crore input tax credit (ITC) racket operating from Ludhiana. Shockingly, the scheme didn’t rely on tech or shell companies alone — it used Aadhaar and bank accounts of unsuspecting daily wage labourers.
This blog explains how the scam worked, what the legal provisions say, and how the government is cracking down to protect the GST ecosystem.
What Is the GST ITC Scam in Ludhiana?
- Fraud amount: ₹157.22 crore
- Fake turnover generated: ₹866.67 crore
- Firms involved: 20 bogus GST registrations
- Modus operandi:
- Poor and unemployed individuals were paid ₹800/day
- Their Aadhaar and bank details were used
- No actual goods or services were traded
- Fake invoices and e-way bills generated to claim ITC
👉 This resulted in fraudulent ITC claims under Section 16 of the CGST Act, 2017, violating multiple provisions related to valid input credit.
Year-wise Breakup of Bogus GST Activity
| Financial Year | Bogus Turnover | Fraudulent ITC Claimed |
|---|---|---|
| 2023–24 | ₹249 crore | ₹45.12 crore |
| 2024–25 | ₹569.54 crore | ₹104.08 crore |
| 2025–26 (till May) | ₹47.25 crore | ₹8.01 crore |
Source: Punjab Taxation Department, SIPU Investigation Report
How Were Labourers Misused in the Scam?
These individuals were:
- Paid small sums to open bank accounts
- Asked to hand over Aadhaar, PAN, and passbooks
- Used as dummy directors or proprietors
- Never involved in actual business or filing
❗ These tactics violate Rule 8 & Rule 9 of CGST Rules, which govern registration procedures and KYC checks.
Legal Perspective: What Does the Law Say?
Under the CGST Act, 2017, ITC can only be claimed if:
- There is a valid tax invoice
- The supplier has paid tax to the government
- The buyer files a proper return under Section 39
All these conditions were violated in this scam.
The case also invites action under:
- Section 132(1)(c) and (i): Fraudulent availing of ITC
- Section 122(1): Penalty for wrongful GST registration
- IPC Sections 420, 468, 471 for fraud, forgery, and cheating
Expert Insight: What Consultants Need to Watch Out For
“Many such scams surface due to poor KYC and absence of physical verification. CAs and GST consultants must verify beneficial ownership and cross-check addresses before registering clients.”
– Tax Practitioner, Ludhiana
📌 Pro tip: Always validate GST registrations using the GST Portal search tool and ensure biometric KYC where applicable.
Related Case: Fake E-Way Bills in Transport Sector
In a parallel case, Maa Durga Roadlines used fake e-way bills to move unaccounted goods worth ₹168 crore, claiming bogus ITC of ₹30.66 crore. These bills falsely showed movement of copper, tobacco, and scrap without actual vehicle entry.
This violates:
- Rule 138 of CGST Rules (e-way bill rules)
- Section 129 & 130 for detention, seizure, and confiscation
What Is the Government Doing?
Finance Minister Harpal Cheema confirmed:
- Two arrests made
- ₹40 lakh cash seized
- Fake invoice books, cheque leaves, NEFT forms recovered
Summary
A ₹157 crore GST ITC scam in Ludhiana involved 20 fake firms using Aadhaar details of daily wagers. The Punjab government has initiated arrests, seized evidence, and launched tighter controls through SIPU to prevent similar frauds.
FAQs on GST ITC Scam
Q1. Can daily wage workers be held liable in GST frauds?
Only if they knowingly participate. However, ignorance is not always a defense.
Q2. How can one verify a GST registration?
Use the Search Taxpayer feature on the official GST portal.
Q3. What is bogus ITC?
ITC claimed without actual receipt of goods/services, often using fake invoices or shell entities.
🔗 Internal & External Resources
Final Word & Call to Action
GST fraud not only affects government revenue but damages the trust in India’s compliance system. Efiletax helps individuals and businesses stay compliant with expert GST filing, registration, and advisory services.
👉 Need help verifying your GST records or ITC claims?
Connect with Efiletax GST Experts today →