Hyderabad | November 13, 2025 – In a significant crackdown on tax fraud, Cyberabad Police have arrested two individuals allegedly involved in an inter-state network that created multiple fake GST-registered firms and fraudulently claimed ₹11.79 crore as Input Tax Credit (ITC). The arrests were made as part of an ongoing investigation into a sophisticated operation that exploited digital systems and forged documentation to manipulate government tax portals.

According to an official statement released by the Cyberabad Police Commissionerate, the network was responsible for establishing ten GST-registered firms that existed only on paper. The accused used falsified documents including Aadhaar cards, PAN cards, electricity bills, rental agreements, and other official certificates to fabricate identities and set up the sham companies. Once these firms were registered, they generated bogus invoices and fake turnover, allowing them to claim ITC on transactions that never actually took place.

The operation caused a loss of ₹11.79 crore to the government, with the fake turnover generated across the non-existent firms estimated at ₹53.73 crore. The Cyberabad Police said that the fraud involved intricate manipulation of the GST portal using computers, which allowed the accused to complete OTP-based verification and obtain GST numbers for companies that did not exist in reality.

The arrested individuals include a 34-year-old man from Gujarat, identified as the organiser and financial handler of the network, and a 43-year-old local resident from Hyderabad, who assisted in implementing the fraudulent schemes. Both were apprehended on November 12 in connection with the case, which was first reported in September this year.

Police revealed that the alleged mastermind, believed to be based in Delhi, along with two others, including a technical operator, remain absconding. Authorities are actively pursuing leads to apprehend the remaining members of the syndicate, which reportedly operated across several states.

Modus Operandi of the Fake GST Network

Investigators have pieced together the modus operandi of the network, highlighting its sophistication and premeditated execution. The accused reportedly fabricated identities using altered Aadhaar and PAN cards, electricity bills, rental agreements, GHMC licences, and Labour Department certificates. Using these fake documents, they were able to acquire SIM cards in false names, which were then used to complete OTP-based verification required for GST registration.

With the fake GST numbers in hand, the group generated bogus purchase and sales invoices, creating artificial turnover and claiming ITC without any actual movement of goods. In addition, the network produced fake E-Waybills, which included real vehicle numbers but tampered chassis details, further supporting the illusion of legitimate transactions.

The scheme demonstrates the extent to which digital systems can be exploited if not closely monitored, particularly when combined with sophisticated forgery of identification and business documentation. By creating a paper trail of fictitious transactions, the accused were able to deceive authorities and claim substantial tax benefits.

Impact and Recovery Efforts

The fraudulent activities of the network were discovered during routine monitoring and verification of GST returns and ITC claims. Authorities noted that the scale of the fake turnover and the fraudulent ITC claims indicated careful planning and coordination among the members.

Cyberabad Police have stated that investigations are ongoing, and the team is working to trace financial flows, identify additional firms that may have been involved, and recover the defrauded amounts. The arrested individuals are likely to face charges under GST fraud regulations, forgery, and other applicable laws, including provisions for organized financial crimes.

Officials have also urged businesses and GST-registered entities to exercise caution and ensure that all transactions are verifiable and backed by legitimate documentation, as authorities intensify surveillance and enforcement to prevent further misuse of the GST framework.

Authorities Urge Vigilance

The case has highlighted vulnerabilities in the GST registration and ITC claim process, particularly the potential for misuse of digital verification methods and reliance on document authenticity. Law enforcement agencies are reportedly considering additional checks and stricter verification protocols to prevent similar schemes in the future.

Cyberabad Police Commissionerate emphasized that the arrested accused were only part of a larger network, indicating that inter-state collaboration among law enforcement agencies is crucial to disrupt organized financial fraud operations. The investigation is also likely to involve scrutiny of banking transactions, online communications, and cross-referencing of vehicle and goods transport records.

This crackdown serves as a reminder of the increasing sophistication of financial fraud in the digital era and the necessity for continuous monitoring and enforcement by authorities to safeguard public revenue.

As the investigation continues, Cyberabad Police have reassured the public that all possible efforts are being made to identify and apprehend the remaining absconding members of the network and recover the defrauded funds.

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