CA Sansaar
CGST Cracks ₹8 Crore ITC Fraud; Company Director Arrested in Delhi
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The Central Goods and Services Tax (CGST) Delhi South Commissionerate has intensified its enforcement action against fraudulent Input Tax Credit (ITC) claims, uncovering a case involving wrongful availment and utilisation of ITC exceeding ₹8 crore. In connection with the matter, the director of a company engaged in trading assorted goods has been arrested for violations of provisions under the CGST Act, 2017.
The case was identified through advanced data analytics, which indicated suspicious ITC claims without corresponding genuine supply transactions. Further investigation revealed that the entities forming part of the supply chain were either suspended or had their registrations cancelled, either suo-moto or upon application. A detailed backward analysis of the supply chain at multiple levels (L1, L2, and L3) confirmed the absence of actual inward supplies, thereby breaking the input credit chain and rendering the ITC ineligible under Section 16 of the CGST Act.
It was also observed that the company had passed on such ineligible ITC to its buyers without any underlying supply of goods or services, thereby extending the irregularity across the transaction chain.
The statement of the company’s director was recorded under Section 70 of the CGST Act on 16 April 2026, wherein he acknowledged his role in managing and executing the transactions. However, he was unable to provide supporting documentation to validate the legitimacy of the claimed ITC.
Considering the nature of the offence, which falls under cognizable and non-bailable provisions as per Sections 132(1)(b) and 132(1)(c), punishable under Section 132(1)(i) of the CGST Act, the director was arrested under Section 69(1). Subsequently, he was presented before the Patiala House Court, which ordered judicial custody until 30 April 2026.
This action reflects the department’s continued commitment to curbing tax evasion and ensuring strict compliance with GST regulations.
The case was identified through advanced data analytics, which indicated suspicious ITC claims without corresponding genuine supply transactions. Further investigation revealed that the entities forming part of the supply chain were either suspended or had their registrations cancelled, either suo-moto or upon application. A detailed backward analysis of the supply chain at multiple levels (L1, L2, and L3) confirmed the absence of actual inward supplies, thereby breaking the input credit chain and rendering the ITC ineligible under Section 16 of the CGST Act.
It was also observed that the company had passed on such ineligible ITC to its buyers without any underlying supply of goods or services, thereby extending the irregularity across the transaction chain.
The statement of the company’s director was recorded under Section 70 of the CGST Act on 16 April 2026, wherein he acknowledged his role in managing and executing the transactions. However, he was unable to provide supporting documentation to validate the legitimacy of the claimed ITC.
Considering the nature of the offence, which falls under cognizable and non-bailable provisions as per Sections 132(1)(b) and 132(1)(c), punishable under Section 132(1)(i) of the CGST Act, the director was arrested under Section 69(1). Subsequently, he was presented before the Patiala House Court, which ordered judicial custody until 30 April 2026.
This action reflects the department’s continued commitment to curbing tax evasion and ensuring strict compliance with GST regulations.
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