Two Startup Founders, Two CAs Arrested in ₹200 Crore GST Fraud Case in Gurugram

The Anti-Evasion Wing of the Central Goods and Services Tax (CGST) Commissionerate, Gurugram, has uncovered an alleged ₹200 crore Input Tax Credit (ITC) fraud, leading to the arrest of four individuals, including two co-founders of a Gurugram-based automobile service startup and two Chartered Accountants. The accused were produced before the competent court and have been remanded to 14 days of judicial custody.

According to CGST officials, the investigation revealed that the alleged fraud was carried out through a network of around 30 shell companies, which were purportedly created to issue invoices without any genuine supply of goods or payment of GST. These invoices were allegedly used to avail fraudulent Input Tax Credit, resulting in a significant loss to the government exchequer.

Officials stated that the operation involved multiple fictitious entities and layered financial transactions designed to conceal the true flow of funds. The invoices existed only on paper, while no corresponding movement of goods reportedly took place and the applicable tax was allegedly never deposited with the Government.

The investigation was initiated following intelligence received from Customs authorities. Over a period of six to eight months, CGST officers examined financial records, analysed digital evidence, scrutinised company documents, and tracked complex transaction trails before identifying the alleged network.

Investigators said the principal accused were associated with an on-demand automobile servicing and battery assistance startup established during 2016–17. The alleged fraudulent activities are believed to have commenced after 2021, when shell entities and fake invoices were allegedly used to generate ineligible GST credits.

CGST officials further alleged that the two Chartered Accountants played an important role in structuring and managing the financial arrangements that facilitated the suspected fraud. Their professional expertise was allegedly used in creating a complex network of interconnected entities.

The accused appeared before CGST authorities after being served summons. Following detailed questioning and examination of documentary as well as digital evidence collected during the investigation, the department arrested all four individuals under the provisions of the Central Goods and Services Tax Act, 2017.

The department clarified that no recovery has been made so far, and the investigation is continuing. Authorities are now examining the financial trail, identifying additional beneficiaries, and verifying whether more companies or individuals were involved in the alleged tax fraud.

Officials are also looking into whether the allegedly inflated financial records were intended to enhance the startup's valuation ahead of a proposed Initial Public Offering (IPO) or a potential stake sale. However, this aspect of the investigation remains under examination, and no final conclusion has been announced. CA Sansaar

Disclaimer: The allegations are based on the findings of the investigating agency. The matter is under investigation, and the guilt or innocence of the accused will be determined through the due process of law.