Bengaluru: In a major crackdown on alleged GST fraud, the Karnataka Commercial Taxes Department has uncovered a massive fake Input Tax Credit (ITC) scam involving transactions worth nearly Rs 2,000 crore. As part of the ongoing investigation, officials have issued a notice to “National Travels”, a transport company reportedly linked to Housing and Minority Welfare Minister BZ Zameer Ahmed Khan, over allegations that its contracted lorries were used in the fake billing network.
According to officials, the fraud revolved around the creation of fake invoices and e-way bills in the name of scrap transportation between Karnataka and Maharashtra, without any actual movement of goods. Investigators suspect that a large network of shell firms was created to generate fraudulent tax credits and evade GST payments.
Commercial Taxes Department officials said the racket mainly operated under the guise of transporting “tungsten carbide scrap”, a material said to have high demand in Maharashtra’s scrap market. Fake firms allegedly generated invoices claiming that scrap material was being transported from Karnataka to Maharashtra through heavy goods vehicles.
Authorities stated that around 20 to 25 heavy vehicles, including lorries contracted by National Travels, were shown every month as transporting scrap consignments. However, during the investigation, officials reportedly found that no physical scrap material was being carried in the vehicles. Instead, only fake documents and invoices were allegedly exchanged and routed through different locations before reaching Maharashtra.
The scam came to light after officials noticed suspicious transaction patterns involving tungsten scrap exports from Bengaluru. Investigators found that despite limited availability of such scrap in the city, records showed large-scale transactions and transportation activities.
Further scrutiny reportedly revealed that firms involved in the network had generated transactions worth nearly Rs 217 crore and claimed tax benefits through fake invoices amounting to around Rs 39 crore. This prompted officials to intensify the investigation, eventually exposing a much larger inter-state fraud network.
The department has so far identified 127 fake companies allegedly involved in the scam. Investigators believe these firms existed only on paper and were created solely to generate fraudulent GST invoices and claim fake ITC benefits.
As part of the probe, officials had earlier arrested five persons in January. The investigation later led to the arrest of two more key accused identified as Salimulla of “SKS Traders” and Hasan Beg of “KH E-Waste Recycler”.
According to investigators, these two firms alone reportedly conducted transactions worth nearly Rs 2,384 crore and availed fake ITC claims amounting to Rs 594 crore.
Officials also found unusual financial growth in some of the companies under scrutiny. In one instance, the turnover of SKS Traders allegedly increased from Rs 50 crore to Rs 945 crore within just three years, raising suspicion among tax authorities.
Despite showing massive transactions on paper, officials claimed that several of these firms had no actual business activity, no stock movement and, in some cases, even lacked physical offices or employees.
Sources in the Commercial Taxes Department said notices have now been issued to transport operators and logistics firms linked to the movement of vehicles used in the fake e-way bills, including National Travels, to determine whether they had knowledge of the alleged fraud or whether their vehicle details were misused by the accused.
Officials clarified that the issuance of notices is part of the investigation process and does not amount to establishing criminal liability at this stage.
The department is now examining financial records, GST filings, transport logs and bank transactions connected to the accused firms. Authorities suspect the racket may have wider links extending beyond Karnataka and Maharashtra.
