In a major crackdown on tax evasion under the GST regime, Central and State GST authorities have unearthed 25,009 fake firms involved in fraudulently claiming ITC worth a staggering Rs 61,545 crore during the financial year 2024-25, officials said.
The concerted efforts of GST enforcement wings led to the recovery of Rs 1,924 crore by way of blocking fraudulent ITC claims and the arrest of 168 individuals during the same period.
According to data compiled over the past two fiscal years - 2023-24 and 2024-25 - a total of 42,140 bogus entities have been identified, responsible for generating fake ITC worth over Rs 1.01 lakh crore. Of this, Rs 3,107 crore has been recovered and 316 people have been arrested for their involvement in such scams.
Fake ITC Fraud Remains a Major Challenge
Officials note that fake ITC fraud remains a significant challenge for the GST administration. Unscrupulous entities continue to exploit the system by creating fictitious firms solely to claim input tax credit and defraud the exchequer.
"To counter this menace, both Central and State governments, along with the GST Network (GSTN), have taken several proactive steps," a senior official told PTI. "These include enhanced data analytics, suspicious e-way bill activity tracking, Aadhaar authentication, and intelligence-sharing mechanisms."
Tightened GST Registration Norms to Deter Fraudsters
The government has significantly tightened the GST registration process to curb the entry of dubious firms. While genuine businesses deemed low-risk receive GST registration within seven days, those flagged as risky undergo physical verification and mandatory Aadhaar-based authentication.
Enforcement measures under the GST Act include:
- Blocking of fraudulently claimed ITC in electronic credit ledgers
- Suspension or cancellation of GST registration for offenders
- Provisional attachment of property or bank accounts
- Legal prosecution and jail terms for masterminds
Two national conferences of enforcement chiefs have also been held to streamline coordination between State and Central GST formations and to align enforcement strategies while maintaining ease of doing business.
What is Input Tax Credit (ITC)?
Under GST, ITC allows businesses to offset the tax they pay on purchases against the tax payable on sales, effectively preventing tax cascading. However, fraudulent claims of ITC not only reduce government revenues but also disrupt the integrity of the indirect tax system.
The Road Ahead
The crackdown on fake ITC claims is expected to intensify further as tax authorities leverage AI-driven analytics and inter-departmental coordination to track down fraudsters. With the government focused on boosting revenue collection and enhancing GST compliance, experts believe that tighter checks and digital audits will play a crucial role in deterring such large-scale tax frauds.
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