Four Held in Gurugram CGST Probe Into Alleged Rs 200 Crore ITC Fraud

GURUGRAM: The Anti-Evasion wing of the Central Goods and Services Tax Commissionerate in Gurugram has arrested four people during an investigation into an alleged input-tax-credit fraud estimated at Rs 200 crore.

The arrested group includes two chartered accountants and two former co-founders of a business in the automobile-service sector. They were produced before a court and sent to 14 days of judicial custody. Custody at this stage is part of the investigation and does not amount to a finding of guilt.

Investigators allege that a network of roughly 30 shell entities was used to issue invoices without an underlying supply of goods. Such invoices can be used to create an artificial tax trail and pass input tax credit through layers of firms, reducing tax liability or enabling ineligible claims. The department is examining the flow of invoices, funds and credits to establish the role attributed to each person and entity.

Input tax credit is a legitimate part of the GST system: a registered business can generally set off eligible tax paid on inputs against tax due on its outward supplies. The alleged fraud arises when paperwork records a purchase or movement that did not occur, allowing credit to be claimed or transferred without a genuine commercial transaction behind it.

That distinction is important because the size of an invoice network is not, by itself, proof against every firm whose details appear in it. Investigators must determine whether an entity was fictitious, controlled by an accused person, knowingly used for circular transactions or drawn into the chain without knowledge. Digital records, bank movements, GST returns and evidence of actual goods supply are likely to be central to that assessment.

The Rs 200 crore amount is the enforcement agency's present estimate of the alleged tax-credit fraud. It can be refined as returns are reconciled and the transaction trail is examined. Likewise, professional qualifications or a past business role do not establish criminal responsibility; the prosecution must connect individual conduct to the alleged scheme.

Judicial custody also does not conclude the matter. The accused retain the right to legal representation and to challenge the allegations, while the department must proceed under the CGST Act and place admissible material before the court. No conviction has been recorded.

For Gurugram's large business ecosystem, the case is a reminder that vendor verification cannot stop at a valid-looking registration number. Companies need evidence of delivery, consistent e-way and payment records, and internal checks capable of spotting invoice-only suppliers. The immediate investigation remains focused on tracing the alleged network and quantifying any credit that was wrongly availed or passed on.