Lucknow, August 6 — Even as Uttar Pradesh grapples with sluggish Goods and Services Tax (GST) growth, a sweeping joint crackdown by state tax and central GST departments has exposed a large-scale scam involving fake firms fraudulently claiming input tax credit (ITC), draining over ₹120 crore from the state’s coffers.
In the ongoing month-long enforcement drive, at least 233 bogus or non-existent companies have been identified so far, with officials warning that the actual number may be higher.
“On our part, we have caught 33 bogus or non-existent firms registered under the state GST,” said Nitin Bansal, state tax commissioner. “Action, including the lodging of FIRs against these entities, is being taken.”
Two of these firms—both operating on paper from Gorakhpur and listed as scrap dealers—claimed ITC fraudulently to the tune of ₹18.96 crore and ₹1.93 crore respectively. FIRs have been filed against both. The remaining 31 entities had their registrations cancelled after officials found no trace of their actual existence.
The scale of the scam expands further under the central GST, where nearly 200 other firms have been found to exist only on paper. These entities generated fake invoices to claim bogus ITC worth an estimated ₹200 crore, with Uttar Pradesh suffering a direct revenue loss of about ₹100 crore, as ITC is shared equally between the Centre and the state.
“These firms never carried out real transactions,” a senior tax official explained. “They created fictitious invoices solely to falsely claim input tax credits.”
Input tax credit is a mechanism meant to reduce the tax burden by allowing businesses to deduct the tax paid on purchases from their final tax liability. However, when fake firms exploit this system, the losses directly affect state revenue—especially in a state like UP, where GST remains the primary source of tax income.
The scam has surfaced at a time when the state’s GST collections have declined by 4% compared to the same period in 2024, sparking concern within the finance department. Principal Secretary (State Tax) M Devraj has ordered an urgent state-wide investigation into the fall in revenue, directing officials to focus on the role of bogus entities.
“The full report for July is still under preparation,” the official said. “But based on preliminary data, we expect the number of fake firms registered under the state GST to rise well beyond 33.”
With the crackdown still underway, officials believe the scam may have deeper roots and broader impact. Investigations are expected to intensify in the coming weeks, with coordinated action from enforcement teams to prevent further leakage of revenue from the public exchequer.
