The Indian government has exposed a major fraud network involving fake GST registrations created using forged identity documents. Until October of this year, authorities identified 489 fraudulent registrations linked to counterfeit Permanent Account Number (PAN) and Aadhaar details. This elaborate scheme resulted in tax evasion exceeding ₹3,000 crore, as revealed in Parliament on Monday, 15 December.
Scale of the Fraud: A Multi-Year Menace
The problem is not new but has been operating at a significant scale. Minister of State for Finance Pankaj Chaudhary, in a written reply to the Lok Sabha, provided alarming data. In the current 2024-25 fiscal year, a staggering 3,977 fake GST registrations were detected using forged PAN and Aadhaar, leading to an evasion of ₹13,109 crore. The previous year, 2023-24, saw an even higher number of 5,699 fraudulent registrations causing a loss of ₹15,085 crore to the exchequer.
The government has responded with arrests. From April to October this year, GST officers arrested 16 individuals. The arrest totals for the full financial years 2024 and 2025 stood at 50 and 67 persons, respectively, indicating a ramp-up in enforcement actions.
Government's Multi-Pronged Crackdown Strategy
Minister Chaudhary detailed the proactive steps being taken to dismantle these fraud networks. The Directorate General of Analytics and Risk Management (DGARM) is at the forefront, using data analytics to spot anomalies in the digital information submitted by proprietorship firms during GST registration.
"DGARM also concentrates on identifying risky taxpayers who are solely set up for fake or bogus invoicing and passing on ineligible Input Tax Credit (ITC) in the supply chain," Chaudhary informed the House.
To coordinate nationwide action, two special drives were launched. The first ran from 16 May 2023 to 14 August 2023, and the second from 16 August 2024 to 30 October 2024. These involved Central and State tax authorities conducting physical verification of business premises. Non-existent GSTINs were identified and suspended or cancelled during these operations.
Strengthening the Registration Process
To prevent such fraud at the source, the government has implemented several stringent measures for new applicants:
- Biometric Aadhaar Authentication: This has been adopted nationwide for processing GST registration applications, supported by data analytics and risk parameters.
- System-Based Risk Rating: Every application now receives a risk rating generated by the system, which is shared with CBIC field formations for targeted verification.
- Mandatory Bank Account Linking: Providing bank account details during registration is compulsory. The account must be in the registered person's name and linked to their PAN. For proprietorships, it must also be connected to Aadhaar. Details must be submitted within 30 days of registration.
- Automated Suspension: The system can now automatically suspend registrations if valid bank details are not provided on time or if returns are not filed for six consecutive months.
- Document Cross-Verification: The authenticity of address proofs is rigorously checked against public sources like land registries, utility company websites, and municipal records.
This comprehensive approach aims to seal the loopholes exploited by fraudsters while making the GST system more robust and trustworthy for legitimate businesses. The crackdown highlights the government's focus on enhancing compliance and protecting revenue critical for national development.
