GST evasion racket uncovered in Madhya Pradesh:Traders used bogus GST numbers, transferring credits and showing supply on single number to evade taxes

In a significant breakthrough, Madhya Pradesh authorities have uncovered a large-scale GST evasion racket involving bogus firms. A joint team of the Economic Offenses Wing (EOW) and the GST department has so far detected tax evasion worth approximately Rs 62 crore, with officials estimating the final figure could reach Rs 75 crore or more once the investigation concludes. According to GST officials, the accused accumulated input tax credit (ITC) on fake GST numbers and then systematically transferred it across multiple bogus accounts. Ultimately, the supply was shown under a single GST number in the chain to commit tax fraud, while the government received no revenue. How the fraud operated Sources reveal that the racket relied heavily on circular trading. Traders registered five or more fake firms under the names of acquaintances or employees, which had no real business activity. These firms were used to show paper transactions and generate ITC, which was then misused to evade taxes. Officials explained that every registered trader is required to file GST returns by the 10th of each month, beginning with GSTR-1 for supplies, followed by GSTR-3B for tax liability. Using the bogus GST numbers, the traders did not deposit actual tax, creating an illusion of legal compliance. Multi-district investigation The investigation, which began in the first week of September, covered nine districts including Bhopal, Indore, Gwalior, Chhatarpur, and Sehore. A key target was a tax consultant in Bhopal and Singrauli who facilitated fraudulent ITC claims. So far, the investigation has revealed: Authorities are preparing to file FIRs, and statements from involved individuals have already been recorded. This is expected to be one of the largest GST evasion cases ever reported in the state. Interstate bogus GST firms exposed The joint raids by GST officers across Madhya Pradesh districts—including Singrauli, Indore, Bhopal, Sehore, Gwalior, and Chhatarpur—revealed interstate connections among fake GST firms. The investigation indicated that supplies were recorded as interstate transactions without actual movement of goods or payment of taxes, suggesting the involvement of a major criminal network. Officials further disclosed that these bogus GST numbers were sold to real traders who needed ITC for compliance. For a 3–5% commission, these traders could claim ITC without paying any tax, effectively defrauding the government. Some identified bogus firms Authorities have identified several firms operating under fraudulent GST registrations with interstate connections: Next steps The EOW and GST department are continuing their probe to map the full scale of the racket. Officers warned that more names and firms may surface as the investigation progresses, potentially revealing one of the largest tax evasion syndicates in the region.