Two startup founders, two CAs held in ₹200 crore GST fraud in Gurugram

Officials alleged nearly 30 shell companies generated fake invoices to claim fraudulent tax credits, causing a huge loss to the exchequer.

The anti-evasion wing of the Central Goods and Services Tax (CGST) Commissionerate, Gurugram, on Saturday said it has unearthed a ₹200-crore input tax credit fraud and arrested four people, including two co-founders of a Gurugram-based auto service startup and two chartered accountants. The suspects were produced before the duty magistrate and sent to 14 days of judicial custody.

Officials are examining whether inflated financial records were intended to boost the company’s valuation ahead of a proposed IPO and stake sale. (HT)

According to CGST officials, the fraud was executed through a network of nearly 30 shell companies that allegedly generated fake invoices without actual supply of goods or payment of GST. These invoices were then used to fraudulently claim input tax credit, causing an estimated loss of around ₹200 crore to the national exchequer.

“The investigation revealed a well-planned and sophisticated network of shell companies used solely for invoice routing and artificial layering of transactions. There was billing on paper, but neither was tax deposited with the government nor was there any actual movement of goods,” a CGST Gurugram spokesperson said.

The investigation started based on intelligence received from the Customs, with the probe taking six to eight months, as investigators tracked financial transactions, analysed company records and uncovered multiple layers of fictitious entities allegedly created to conceal the movement of funds.

Officials said the two main accused are former founding directors of an on-demand automobile service and battery assistance startup established in 2016-17. According to investigators, the alleged fraud began after 2021, as they started creating fake invoices and shell entities to fraudulently avail of tax benefits.

“The suspect had professional expertise and used it to engineer a complex financial structure. Two chartered accountants allegedly played a key role in designing and operating the fraudulent network,” the spokesperson said.

Investigators said the suspects were served summons and asked to appear before CGST officials on Saturday, following which they were questioned and arrested. “During questioning, we confronted them with documentary evidence and digital records. Based on the material available during the investigation, they confessed and were arrested under the provisions of the CGST Act,” an assistant commissioner, CGST Gurugram, who did not wish to be named, said.

Officials said no recovery has been made so far, and the investigation is continuing to identify additional beneficiaries, trace financial transactions and determine whether more entities or individuals were involved.

Another senior official said investigators were also examining whether the suspects intended to use the artificially inflated financial records to strengthen the company’s valuation ahead of a proposed initial public offering (IPO) and a possible stake sale.