AI platform detects alleged ₹5,700 crore GST fraud network involving 1,500 shell companies in India

Innefu Labs claims its AI-powered Prophecy Eagle I platform has detected a suspected ₹5,700 crore GST fraud network involving more than 1,500 businesses across India.

Innefu Labs, an Indian artificial intelligence company, said they have identified a suspected GST fraud network involving more than 1,500 registered businesses and an estimated ₹5,700 crore in potentially fraudulent input tax credit (ITC). Prophecy Eagle I, the company's AI-powered financial intelligence platform, was used to identify the network by analyzing financial data and business registrations across various jurisdictions.

According to Innefu Labs, suspected transactions happened during one fiscal year. There were no fraudulent GST registrations or late returns, which makes it challenging to detect suspicious activity through individual compliance checks, the company said. It reportedly identified relationships between the entities by combining GST data, identity and transport data. However, the estimated exposure remains subject to verification by the concerned enforcement authorities, and the company has not presented the figure as an established recovery or final finding of fraud.

How AI detected links between 1,500 businesses

Prophecy Eagle I spotted some patterns that indicated potential organized financial fraud, Innefu Labs said. One involved the alleged reuse of the same facial identity across dozens of business registrations in different zones within a month.

The platform also identified newly registered companies that appeared to have moved large volumes of Input Tax Credit (ITC) within a few weeks of registration, despite little evidence of purchases. Another trend was circular trading, in which tax credits and transactions were passed back and forth among several companies and ended up near where they started.

Pragya Singha Roy