Bengaluru: In one of the biggest GST fraud crackdowns in Karnataka, the Bengaluru Commercial Tax Department’s Intelligence Wing has unearthed a massive fake Input Tax Credit (ITC) scam involving transactions worth Rs 2,384 crore. Officials have arrested two key accused who allegedly created a network of bogus firms and generated fake invoices under the guise of scrap trading to fraudulently claim GST benefits.
The arrested accused have been identified as Salimulla Beig (59) and Hussain Baig (35). According to investigators, the duo used forged documents to create multiple shell companies and carried out fake business transactions on paper without any actual supply of goods. Through this network, they allegedly claimed crores of rupees in fraudulent ITC from the government.
Officials said the investigation exposed a massive web of 127 fake firms, out of which 72 entities were directly involved in suspicious financial transactions and GST claims. The firms were allegedly used to circulate fake invoices and inflate turnover figures to illegally avail tax credits.
During the probe, investigators found that Salimulla Baig alone had shown fake transactions worth nearly Rs 2,172 crore and fraudulently claimed approximately Rs 382 crore in fake ITC. Haseen Beg, on the other hand, allegedly operated around 55 shell firms and generated transactions worth Rs 212 crore, leading to wrongful ITC claims of nearly Rs 35 crore.
Authorities stated that together, the two accused were responsible for fake ITC fraud amounting to nearly Rs 420 crore.
According to officials, the racket primarily operated in the name of trading tungsten carbide scrap, e-waste and various categories of metal scrap. However, no physical movement or delivery of goods actually took place. The entire operation existed only on paper through fabricated invoices, e-way bills and manipulated GST filings.
Investigators said the accused exploited loopholes in the GST system by creating artificial business chains between fake firms to generate tax credits without conducting genuine commercial activity. The fake invoices were allegedly circulated across multiple states, indicating that the operation had interstate links.
One company that drew the department’s attention during the investigation was “SKS Traders.” Officials found that the firm’s turnover had skyrocketed from Rs 50 crore to nearly Rs 900 crore within just three years. However, the company reportedly lacked any infrastructure, warehouses, manpower or business records to justify such enormous growth.
“Despite showing transactions running into hundreds of crores, there were no supporting documents or physical business operations. This raised serious suspicion and eventually led investigators deeper into the fake ITC network,” a senior official said.
The Commercial Tax Department has registered cases against the accused under various provisions of the GST Act. Both accused have been remanded to judicial custody while further investigation continues.
Officials suspect that more individuals and larger financial operators could be linked to the racket. Authorities are now examining bank transactions, digital records and GST filings associated with several other firms connected to the network.
The department has intensified scrutiny on suspicious scrap trading businesses and shell companies following the detection of multiple fake ITC frauds in recent months.
This is not the first major GST fraud case uncovered by Karnataka authorities this year. In January, the Commercial Tax Department had arrested five individuals in connection with another fake ITC racket involving fraudulent transactions worth ₹1,464 crore. With the latest operation, the total number of major arrests made by the department this year has risen to seven.
Officials said advanced data analytics and inter-state coordination are now being used to identify fake billing syndicates operating across India. Authorities also warned businesses against participating in circular trading or fake invoicing schemes, stating that strict legal action would be taken against offenders.
The department believes the crackdown is part of a larger effort to protect government revenue and strengthen the integrity of the GST system, which has increasingly become a target for organised tax fraud networks operating through shell companies and fabricated transactions.
