₹260 Crore Fake Billing Scheme Uncovered in Mandi Gobindgarh

In what’s turning out to be one of the bigger GST fraud crackdowns this year, tax officials from the Ludhiana CGST Commissionerate have unearthed a ₹260-crore fake billing network in Punjab’s industrial town of Mandi Gobindgarh. This syndicate didn’t just push paper—they tapped into defunct rolling mills to issue bogus invoices and siphon off massive input tax credits (ITC), posing fresh concerns about compliance risks in the iron and steel sector.

How the Scam Was Orchestrated

Defunct Mills as the Starting Point At the heart of this elaborate scam was a calculated move: the fraudsters went after old, financially broken rolling mills—companies that had once operated legitimately but had long since gone silent. These mills were acquired and quietly reactivated—not for production, but as vehicles to churn out fake GST invoices.

Bogus Billing, No Goods Moved With these mills in place, the group started issuing fake GST invoices amounting to ₹260 crore. Crucially, there was no actual supply of goods—no trucks moved, no raw materials exchanged hands. But on paper, it all looked real enough to wrongfully claim ITC and circulate it within the GST system.

Five Firms, One Fraud Network Investigations have revealed at least five firms actively participated in this racket. These entities worked together to issue and pass on these fake bills, forming a web that helped camouflage the scale and speed of the fraud.

Enforcement Action Kicks In

Key Arrests Made on July 24 Working on targeted intelligence, CGST officials arrested two individuals believed to be the masterminds behind the entire operation. Both were allegedly pulling the strings, controlling the shell mills and facilitating the fake transactions.

Investigation Still Ongoing While two have been arrested, the story isn’t over yet. Officials are continuing to dig into this network to unearth more shell entities and identify others who may have knowingly—or unknowingly—benefited from this scheme. More arrests could be on the horizon.

₹47 Crore in Tax Loss While the total billing scam is pegged at ₹260 crore, the immediate loss to the exchequer through wrongful ITC claims is estimated at ₹47 crore. That’s not just revenue lost—it’s also an unfair blow to compliant businesses trying to compete honestly.

Why This Case Deserves Attention

Fraud with a Strategy This wasn’t a run-of-the-mill fake billing case. It was structured and strategic. Distressed mills were weaponised to make everything seem legitimate on the surface, turning them into ITC claim machines that operated below the radar for months—maybe longer.

The Sector's Underlying Risk The metals and scrap trading segment already carries a high risk of tax fraud. Incidents like this only deepen the trust deficit and make genuine businesses more vulnerable to audit, scrutiny, and disruptions.

What Businesses Should Learn

Don’t Skip Vendor Due Diligence If you’re operating in high-risk sectors like metals and steel, double-check your supplier’s credentials. Verify their GST registration, look at their past filings, and, if possible, confirm they actually exist where they say they do.

Claim ITC with Care Only claim Input Tax Credit (ITC) if the underlying supply is real and verifiable. Using fake or suspicious invoices—whether knowingly or due to negligence—can attract severe penalties and even criminal charges under Section 132 of the CGST Act.

Reconcile Everything, Regularly Keep a tight watch on your filings. Match your vendor GSTR-1 data with your GSTR-3B, and reconcile credits using GSTR-2B. Also, demand and verify e-way bills and other supporting documents for your purchases. It may seem tedious, but it’s your best protection against inadvertently getting caught in a fake billing loop.

A Broader Message from Enforcement

This crackdown sends a clear signal: authorities are watching, and they’re ready to act. The government is keen to shut down shell-firm operations and restore fairness in the system, so honest businesses aren’t penalised because others decided to game the rules.

In Closing: The ₹260-crore Mandi Gobindgarh scam is a wake-up call—especially for sectors already under the scanner. For businesses, it’s a reminder to revisit compliance hygiene, double down on vendor checks, and ensure that ITC claims are firmly tied to actual economic activity. For enforcement agencies, it’s just another step in a longer war against GST fraud—one that’s far from over.