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CrimeGujarat

Two arrested for ₹4.2 crore GST fraud in Bhavnagar

by TLAteam May 12, 2025May 12, 2025
written by TLAteam May 12, 2025May 12, 2025
Two arrested for ₹4.2 crore GST fraud in Bhavnagar

Two people were arrested for claiming over ₹4.2 crore in Input Tax Credit (ITC) through bogus invoices in Bhavnagar.

Business News

The arrests come just days after a similar case involving ₹8 crore was uncovered in Alang.

In the latest action by the Bhavnagar Central GST Department, Rakesh Ganpat Rathod, proprietor of M/s Krishna Machine Tools and a partner in M/s RR Enterprises, a resident of Bhavnagar, was taken into custody.

The identity of the other accused is being ascertained.

According to GST officials, Rathod was operating a racket involving the issuance of fake bills to various suppliers in exchange for a 4 per cent commission.

During interrogation, Rathod confessed to a well-orchestrated scheme: funds were temporarily deposited into the firm’s bank account to simulate legitimate transactions, then withdrawn in cash, the commission deducted, and the balance handed over to a middleman.

He also revealed that a chartered accountant facilitated the creation of fake accounts and the filing of bogus GST returns, charging 0.5 per cent commission per transaction.

The department suspects the involvement of a wider nexus that includes a chartered accountant, a middleman, local Shroffs (money handlers), and Angadiya firms (informal couriers).

Investigations into their roles have already been launched.

Chandrabhan Maurya, proprietor of M/s Ruchi Steel in Alang, was jailed earlier this week for availing fake ITC worth over ₹8 crore.

To prevent further misuse, the GST Department has begun proceedings to cancel the GST registrations of M/s Krishna Machine Tools and M/s R R Enterprises.

Officials confirmed that efforts are underway to recover the fraudulently claimed ITC. Authorities have reiterated that such fraudulent activities severely impact revenue and undermine the integrity of the GST system, promising further action against all entities involved.

According to official data from the Central GST (CGST) and State GST departments, multiple high-value scams have been unearthed across cities like Ahmedabad, Surat, Rajkot, Vadodara, and Bhavnagar.

The modus operandi often involves shell firms, forged invoices, and collusion between business owners, chartered accountants, and middlemen, including Angadiya firms and money handlers (Shroffs).

In Bhavnagar, the GST Department has arrested individuals involved in scams exceeding Rs 12 crore in the last week.

A common tactic involves creating fake firms to generate invoices for non-existent transactions, which are then used to claim ITC and evade tax liabilities.

The suspects typically deposit funds temporarily into bank accounts to mimic legitimate trade before withdrawing the cash and redistributing it through informal channels. Chartered accountants have come under the radar for facilitating these transactions by filing fake returns for a commission. Recent crackdowns have also led to the cancellation of GST registrations and recovery proceedings against multiple entities.

Officials said these scams not only hurt government revenues but also distort fair trade practices. With GST fraud cases rising steadily, enforcement agencies have ramped up surveillance, data analytics, and inter-departmental coordination to tackle the menace.

Over ₹500 crore worth of fake ITC claims have been detected in Gujarat over the past two years, prompting authorities to tighten audit procedures and adopt AI-based red flagging systems. Investigations are ongoing, and more arrests are expected as layers of the scam network are uncovered.

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