Investigation Reveals Stolen Identities Used to Funnel ₹250 Crore in GST Fraud

Police in Kanpur have dismantled an organised tax evasion network that allegedly used the stolen identities of vulnerable citizens to facilitate fraudulent transactions worth approximately ₹250 crore. The investigation has exposed how criminal syndicates are exploiting gaps in financial verification processes to register shell firms and siphon public funds through the Goods and Services Tax (GST) system.

Background and Context

The sophisticated operation came to light after a resident of the Nazirabad area, Anurag Verma, filed a complaint regarding the misuse of his personal documents. Verma had submitted his identification papers while applying for a personal loan, only to discover later that a company had been registered in his name without his knowledge. A probe by the Cyber Cell subsequently revealed that this was part of a wider inter-state racket targeting individuals from economically weaker backgrounds, including e-rickshaw drivers and students, who were lured by promises of easy loans.

Key Figures and Entities

According to Police Commissioner Raghubir Lal, two accused individuals—Kapil Mishra and Amardeep alias Raj—have been arrested, while five others remain absconding. The investigation traced a significant portion of the illicit funds to a bank account opened in the name of Ujjawal Gupta, the son of an e-rickshaw driver from neighbouring Unnao district. Gupta’s family had unknowingly submitted their documents while seeking a medical loan and were unaware that a firm was operating in his name, through which ₹117 crore was eventually transacted.

Legal and Financial Mechanisms

Investigators allege that the syndicate registered shell companies using forged rent agreements and utility documents. These firms existed only on paper, issuing fake invoices without any actual supply of goods or services. By generating fake e-way bills and circulating invoices among interconnected entities, the operators artificially inflated turnover to claim fraudulent Input Tax Credit (ITC). The stolen tax credits were then used to reduce actual tax liabilities or claim refunds, with funds routed through multiple bank accounts to project them as legitimate business proceeds.

International Implications and Policy Response

This case underscores the global challenge of "missing trader" fraud and the misuse of digital tax systems, where criminals exploit the lag between tax collection and remittance. While the GST network was designed to broaden the tax base and improve compliance, the incident highlights the urgent need for stricter Know Your Customer (KYC) protocols during the registration of new firms. It also emphasizes the necessity for real-time data sharing between tax authorities, banks, and law enforcement to detect anomalies in ownership and transaction volumes early.

Sources

This report draws on statements provided by the Kanpur Police Commissioner, official findings from the Cyber Cell investigation, and public records regarding the registration of criminal cases for cheating and forgery.