Two Arrested for ₹4.2 Crore GST Fraud in Bhavnagar, Gujarat
Bhavnagar, 11 May 2025 (IANS): Authorities in Gujarat’s Bhavnagar have arrested two individuals for fraudulently claiming over ₹4.2 crore in Input Tax Credit (ITC) using fake invoices. This arrest follows a recent case in Alang, where a similar GST fraud amounting to ₹8 crore was uncovered.
Details of the Arrest and Fraud Scheme
Rakesh Ganpat Rathod, a resident of Bhavnagar, was apprehended by the Bhavnagar Central GST Department. Rathod is the proprietor of M/s Krishna Machine Tools and a partner in M/s R.R. Enterprises. The identity of the second accused is still under investigation.
Rathod is said to have orchestrated a fraudulent scheme involving fake billing. He charged a 4% commission to generate bogus invoices for multiple suppliers. The scheme included moving funds into the firm’s bank accounts to simulate legitimate transactions. After temporarily depositing the funds, they were withdrawn in cash, the commission deducted, and the remainder handed over to a middleman.
Additionally, Rathod disclosed that a chartered accountant facilitated the creation of fake accounts and filing of fraudulent GST returns, for which the accountant received a 0.5% commission on each transaction.
Wider Scam Network and Ongoing Investigations
Authorities suspect that the fraud may involve a larger network, including the chartered accountant, middlemen, local money handlers (Shroffs), and informal courier services (Angadiya firms). Investigations into other potential suspects are already underway.
Earlier this week, Chandrabhan Maurya, the owner of M/s Ruchi Steel in Alang, was arrested for claiming fake ITC worth over ₹8 crore. To prevent further misuse, the GST Department has initiated the cancellation of GST registrations for both M/s Krishna Machine Tools and M/s R.R. Enterprises.
In total, the Gujarat GST Department has uncovered scams exceeding ₹12 crore in Bhavnagar in the past week alone.
Growing GST Fraud Cases and Enforcement Action
The ongoing crackdown on GST fraud in Gujarat has revealed a pattern involving the creation of fake firms, the issuance of forged invoices, and collusion between business owners, accountants, and intermediaries. In Bhavnagar, funds are temporarily deposited into bank accounts to mimic genuine business transactions, only to be withdrawn and redirected through unofficial channels.
Authorities have already started cancelling GST registrations for firms involved in such fraudulent activities and are working to recover the falsely claimed ITC. These scams not only result in significant revenue loss but also harm fair competition in the market.
Over the last two years, Gujarat has seen over ₹500 crore in fake ITC claims, prompting the authorities to implement more stringent measures. These include advanced data analysis, inter-departmental collaboration, and AI-driven detection systems. As investigations continue, further arrests are expected, with stricter regulations anticipated to combat GST fraud more effectively.
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