₹27 Crore GST Credit Scam Exposed: DGGI Busts Fake Invoice Network in Visakhapatnam

Visakhapatnam — The Directorate General of GST Intelligence (DGGI) has uncovered a sophisticated tax fraud network that allegedly siphoned off more than ₹27 crore in wrongful input tax credit (ITC) using a maze of shell companies and fake invoices. The investigation has led to the arrest of a key suspect believed to have orchestrated the operation, which officials say was designed to simulate legitimate business activity while quietly draining government revenue.

A fraud built on paperwork, not production

The probe began after DGGI officers noticed unusual patterns in ITC claims filed by multiple firms. What initially appeared to be isolated discrepancies soon revealed a larger structure of interconnected entities that existed largely on paper.

According to investigators, these firms were registered under GST but had no real commercial activity. They issued invoices for services such as works contracts, manpower supply, and construction materials—without any actual movement of goods, labour deployment, or project execution. There were no operational sites, no employees, and no deliveries to match the transactions reflected in tax filings.

How the ITC system was exploited

Under the GST regime, ITC allows businesses to offset tax paid on inputs against their output tax liability, ensuring tax is levied only on value addition. Investigators allege that this mechanism was deliberately misused by converting ITC into a saleable instrument.

Dummy firms generated invoices that enabled beneficiary companies to claim tax credits. Payments corresponding to these invoices were routed through formal banking channels to give the appearance of compliance. After the transfers, the operators allegedly deducted a commission—estimated at around three percent—and moved the remaining funds through multiple accounts before withdrawing them in cash.

Officials estimate that fraudulent ITC amounting to ₹27.07 crore was availed, of which ₹15.30 crore was passed on to beneficiary firms. The remaining amount, investigators say, accounts for commissions, cash withdrawals, and transaction layering, with figures expected to change as further analysis continues.

Alleged mastermind arrested

DGGI has arrested Mallikarjuna Manoj Kumar, who authorities describe as the central operator of the network. According to officials, statements recorded during the investigation indicate that the entities involved were created solely to facilitate the generation and transfer of fake ITC.

Investigators allege that associates managed bank accounts, handled fund transfers, and coordinated cash withdrawals, allowing the operation to function while insulating end beneficiaries. The structure, officials say, was deliberately layered to reduce visibility and distribute risk across multiple fronts.

Investigation ongoing

The DGGI continues to trace financial flows, identify beneficiary firms, and assess the full extent of revenue loss to the exchequer. Officials indicated that further arrests and recoveries are possible as more accounts and linked entities come under scrutiny.

The case highlights the evolving nature of GST-related frauds, where digital filings and banking trails are exploited to create an illusion of compliance—underscoring the need for deeper data analytics and tighter verification mechanisms within the tax system.