DGGI Uncovers ₹3,200 Crore GST Fraud in Bengaluru: Bogus Firms, Fake Invoices, and Stock Market Manipulation

The Directorate General of GST Intelligence ( DGGI ), Bengaluru Zonal Unit, uncovered a massive Rs, 3,200 crore fake invoice scam involving bogus companies, fraudulent tax credits, and stock market manipulation.

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Officials conducted searches at over 30 locations in Bengaluru and Mumbai, leading to the arrest of two suspects, while a third remains absconding. According to Additional Director General Sucheta Sreejesh, the fraud involved creating fake companies with no real business operations, using circular trading to inflate turnover, and misleading investors on stock exchanges.

The scam caused a loss of Rs. 665 crore in fraudulent Input Tax Credit (ITC) and also tricked banks and stock market investors into believing these companies were profitable. Investigations revealed that the accused set up 15 fake companies, falsely claiming to have received FMCG goods worth hundreds of crores.

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Instead of actual goods movement, these companies only issued invoices for services like IT support, management consultancy, and advertising services that were never actually provided. One of the biggest red flags was the lack of outward e-way bills, which meant that while these companies claimed to receive goods, they never actually sold or moved any products.

Nine out of these 15 fake companies were listed on Indian stock exchanges. The accused manipulated share prices using circular trading, a tactic where companies trade fake invoices among themselves to inflate turnover artificially.

Investigations showed that all 15 companies filed GST returns from the same IP addresses, indicating they were controlled by a single group of fraudsters. During searches, officials found original invoices and financial documents from different companies stored in the same locations, proving that the same individuals were running multiple fake businesses.

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DGGI officials also discovered that many of the so-called directors of these companies were just ‘namesake’ directors, individuals who had no real role in the companies but were used to hide the identity of the actual masterminds.

Adding to the evidence, chartered accountants (CAs) who signed off on the financial statements admitted that they had approved whatever documents were given to them, without verifying their authenticity.

This fraudulent scheme had been operating for the past seven to eight years. The DGGI is now working to recover Rs. 665 crore in fake Input Tax Credit (ITC) claimed by these fraudulent companies.

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