Who Were Arrested for the Rs 4.2 Crore GST Fraud in Gujarat?
Click to start listening
Synopsis
In a shocking turn of events, two individuals were arrested in Bhavnagar for attempting to fraudulently claim over Rs 4.2 crore in Input Tax Credit through bogus invoices. This case highlights the ongoing battle against GST fraud in Gujarat and the lengths to which some will go to exploit the system.
Key Takeaways
- Two arrests were made in a Rs 4.2 crore GST fraud case.
- Fraudulent invoices were used to claim Input Tax Credit.
- The operation involved a network including chartered accountants and intermediaries.
- Authorities are tightening GST regulations to combat fraud.
- Over Rs 500 crore in fake claims identified in Gujarat in two years.
Bhavnagar, May 11 (NationPress) Two individuals were apprehended for attempting to claim over Rs 4.2 crore in Input Tax Credit (ITC) using fraudulent invoices in the city of Bhavnagar, Gujarat.
This arrest follows closely on the heels of another case that revealed Rs 8 crore in fraudulent claims in Alang.
As part of the recent operation by the Bhavnagar Central GST Department, Rakesh Ganpat Rathod, who runs M/s Krishna Machine Tools and is a partner at M/s R.R. Enterprises, was detained. The identity of the second suspect is still being verified.
GST officials have indicated that Rathod was orchestrating a scheme that involved issuing fake invoices to various suppliers, for which he received a 4 percent commission.
During questioning, Rathod admitted to a meticulously planned operation: funds were briefly deposited into the business's bank account to create an illusion of legitimate transactions, only to be withdrawn as cash, with the commission taken off and the remainder handed over to an intermediary.
He further disclosed that a chartered accountant assisted in fabricating fake accounts and submitting false GST returns, charging a 0.5 percent commission for each transaction.
The department suspects a broader network may be involved, including a chartered accountant, intermediaries, local Shroffs (money handlers), and Angadiya firms (informal couriers). Investigations into their roles are currently underway.
Earlier this week, Chandrabhan Maurya, owner of M/s Ruchi Steel in Alang, was imprisoned for securing fake ITC worth over Rs 8 crore.
To curb further exploitation, the GST Department has initiated the process to revoke the GST registrations of M/s Krishna Machine Tools and M/s R.R. Enterprises.
Officials have confirmed that efforts are being made to recover the fraudulently claimed ITC. They reiterated that such fraudulent practices significantly harm revenue and compromise the integrity of the GST system, pledging further action against all implicated parties.
Official reports from the Central GST (CGST) and State GST departments indicate that multiple high-value scams have been exposed in cities including Ahmedabad, Surat, Rajkot, Vadodara, and Bhavnagar.
The typical modus operandi involves the creation of shell companies, falsified invoices, and collusion among business owners, chartered accountants, and middlemen, including Angadiya firms and money handlers (Shroffs).
In Bhavnagar, the GST Department has detained individuals linked to scams that exceed Rs 12 crore just in the past week.
A prevalent tactic involves the establishment of fake firms to generate invoices for non-existent transactions, which are then utilized to claim ITC and evade tax obligations.
The suspects usually deposit funds temporarily into bank accounts to imitate legitimate trading before withdrawing the cash to redistribute it through informal means. Chartered accountants are increasingly under scrutiny for facilitating these transactions by filing fraudulent returns for a commission. Recent crackdowns have also resulted in the cancellation of GST registrations and recovery actions against various entities.
Officials have noted that these scams not only diminish government revenues but also disrupt fair trade practices. With rising GST fraud cases, enforcement agencies have stepped up their surveillance, data analytics, and inter-departmental cooperation to combat this issue.
Over Rs 500 crore in fake ITC claims have been identified in Gujarat over the past two years, prompting authorities to strengthen audit protocols and implement AI-driven red flagging systems. Investigations are ongoing, and further arrests are anticipated as more layers of the scam network are uncovered.
Point of View
The ongoing GST fraud cases in India, particularly in Gujarat, underscore a critical challenge for the government and regulatory bodies. The involvement of multiple players, including chartered accountants and intermediaries, highlights the need for stricter oversight and more robust mechanisms to prevent such fraudulent activities. It is imperative to restore trust and ensure compliance within the GST framework.
NationPress
23/07/2025
Frequently Asked Questions
What is the GST fraud amount involved in this case?
The fraud amount involved in this case is over Rs 4.2 crore.
Who was arrested in connection with the GST fraud?
Rakesh Ganpat Rathod, the proprietor of M/s Krishna Machine Tools, was arrested, along with another unidentified individual.
What tactics were used in the GST fraud?
The fraud involved issuing fake invoices, temporarily depositing funds to mimic legitimate transactions, and withdrawing cash to evade tax liabilities.
What actions are being taken against those involved?
The GST Department is initiating proceedings to cancel GST registrations and is working to recover the fraudulently claimed ITC.
How prevalent is GST fraud in Gujarat?
In the past two years, over Rs 500 crore worth of fake ITC claims have been detected in Gujarat, indicating a significant issue with GST fraud.
