Tirupati: What began as a routine day for a small labourer in Chittoor turned into a turning point for tax authorities when he received a GST penalty notice demanding Rs 12.17 crore, an amount far beyond his lifetime earnings. His attempt to understand the notice triggered the unearthing of a Rs 1,000-crore GST Input Tax Credit (ITC) scam spread across three states. Investigators soon discovered that the man’s identity had been hijacked to open firms, generate fake invoices and claim massive ITC refunds. GST officials confirmed that he was not alone -several unsuspecting labourers and petty traders had been served similar notices, their documents stolen or obtained under false pretences. They said these fraudulent activities had been going on quietly for years, even though the department had conducted investigations from time to time. According to officials, the fraudsters targeted the poorest individuals, offering them Rs 10,000 for a ‘simple task.’ They collected Aadhaar, PAN and photographs, and exploited DigiLocker loopholes by linking the victims’ Aadhaar to mobile numbers controlled by the gang.
With access to all documents, the network generated fake email IDs, SIM cards and bank accounts – everything needed to register companies in the victims’ names.
Over time, this web of shell entities spread across Andhra Pradesh, Telangana and Karnataka. Many of the companies were registered in Chittoor, invoices were issued from Hyderabad, and funds flowed through Bengaluru accounts. Officials say several firms in this network engaged in systematic malpractice to draw illicit ITC benefits.
The scam flourished due to weak checks at banks, where high-value accounts were opened without verifying whether the account holders ran businesses. Lapses in GST registration scrutiny and delayed audits of unusually high turnovers further allowed the racket to grow.
The investigation widened dramatically when officials stumbled upon a High Court writ petition (No. 63/2025) filed using yet another victim’s identity. Forged signatures, fake emails and altered documents indicated a deeper conspiracy.
After the anomalies surfaced, SGST authorities issued nearly 450 show cause notices in the last fortnight. Several key operatives have since gone underground. Four specialised teams are now analysing IP logs, bank records, call data and DigiLocker trails to trace the masterminds.
Investigators believe more than 50 individuals – including registration agents, digital-service-centre operators, intermediaries and handlers of shell firms – may be involved. The inquiry may also extend to certain IT companies whose names appear frequently in suspicious billing patterns. Officials say more revelations will follow as the probe enters its next stage.
