Delhi-based AI company Innefu Labs says its financial intelligence platform, Prophecy Eagle I, has uncovered a suspected GST fraud network of more than 1,500 registered businesses linked to an estimated ₹5,700 crore in potentially fraudulent input tax credit (ITC). The company disclosed the findings on 2 November 2026 and said the figure is a suspected exposure that enforcement authorities still have to verify.

The case shows how AI that links scattered government and financial records is becoming a frontline tool against tax fraud, an area where checking each filing on its own often misses the bigger pattern.

How Innefu’s AI flagged the suspected GST fraud network

According to Innefu Labs, the suspected transactions took place within a single financial year. None of the businesses showed obvious red flags such as fake registrations or late returns, which made the network hard to catch through routine compliance checks. The platform instead joined GST data with identity and transport records to map the relationships between entities.

The company said Prophecy Eagle I picked up several warning patterns:

• The same facial identity allegedly reused across dozens of business registrations in different zones within a month
• Newly registered firms moving large volumes of input tax credit within weeks of registration, with little evidence of real purchases
• Circular trading, where credits and transactions pass between several companies and end up close to where they started
• A separate suspected diversion of subsidised products into markets that were not eligible for the subsidy

“The network was hard to recognise because the businesses appeared compliant when viewed individually,” said Tarun Wig, co-founder and CEO of Innefu Labs. He said the platform linked information from several databases to surface patterns that would not be visible in a single record. Co-founder and CTO Abhishek Sharma said the system relies on identity correlation, behavioural analysis and network mapping of filing data.

What Prophecy Eagle I analyses

Innefu describes Prophecy Eagle I as an AI-driven fraud detection and investigation system for enforcement agencies. It draws on GST returns, e-way bills, bank records, FASTag data and open-source intelligence, and uses geospatial analysis and link mapping to trace connections between businesses and money flows. It is built to help investigators spot suspicious registrations, circular trading, carousel fraud and vanishing-trader schemes.

The company has been clear that the ₹5,700 crore number is not a confirmed recovery or a final finding of fraud. It has not yet gone through due process with the relevant authorities, as Mint reported.

Why AI matters for India’s fight against fake input tax credit

Fake ITC claims remain a large problem for India’s indirect tax system. The Central Board of Indirect Taxes and Customs detected fake ITC worth ₹36,374 crore across 9,190 cases in FY 2023-24, with 182 arrests, according to the Ministry of Finance. Shell companies that look clean on paper are central to most of these schemes.

That is where data-linking AI is gaining ground. Similar approaches are already being used to block scam calls and messages at telecom scale and to warn users about fraud on messaging apps. At the same time, regulators are watching how AI systems handle sensitive data, as seen in CERT-In’s recent advisory on AI agents.

For India’s tax administration, tools that join GST, identity, banking and transport data could help move fraud detection from case-by-case audits to network-level analysis, building on the country’s digital public infrastructure. The real test will be whether findings like Innefu’s hold up once tax authorities verify them.

Key takeaways

• Innefu Labs says its AI platform flagged a suspected network of 1,500+ firms and ₹5,700 crore in potentially fake ITC.
• The businesses looked compliant one by one; the pattern only appeared when GST, identity and transport data were linked.
• The figure is unverified and still has to be checked by enforcement authorities.

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