Authorities from both Central and State Goods and Services Tax (GST) departments have unearthed a large-scale tax fraud involving thousands of fake companies.
According to official data, during the financial year 2024-25 alone, more than 25,000 bogus firms were found to be passing on fake Input Tax Credit (ITC) worth a staggering ₹61,545 crore.
This revelation has raised serious concerns about the extent of GST fraud in the country. In response to the crackdown, officials have managed to recover Rs 1,924 crore and have arrested 168 individuals suspected to be linked with these fraudulent activities.
The government has since intensified its monitoring and enforcement mechanisms to identify the masterminds behind these operations and secure public revenue.
Looking at the broader picture over the last two financial years — 2023-24 and 2024-25 — the combined efforts of GST officers have led to the detection of 42,140 fake companies.
These entities were responsible for generating fake ITC worth over Rs 1.01 lakh crore. Authorities have recovered Rs 3,107 crore and made a total of 316 arrests so far.
Officials have stated that fake ITC claims have been a long-standing challenge under the GST system. Unscrupulous individuals have been setting up fake firms solely to generate fraudulent credit and claim tax benefits that do not exist.
This not only causes significant revenue loss to the exchequer but also disturbs the fairness of genuine businesses operating within the system.
To tackle this issue, the GST registration process has been tightened considerably. Now, applications flagged as risky through data analytics undergo more rigorous scrutiny.
Physical verification of business premises and Aadhaar authentication are mandatory for these high-risk applicants. However, for those considered safe, registration is granted within a week, maintaining a balance between compliance and ease of doing business.
Under the GST law, strict actions are being taken against those found guilty of claiming ITC fraudulently. Penalties include suspension or cancellation of GST registration, blocking of credit in electronic ledgers, and even attachment of property and bank accounts.
These steps are aimed at deterring such practices and safeguarding government revenues.
The government has also held two national conferences for enforcement heads from both central and state GST wings. These meetings have focused on enhancing coordination between different departments and emphasizing the importance of enforcement without hampering honest businesses.
Officials emphasized that a proactive approach, combined with the use of advanced data tools, has helped in identifying suspicious activities such as false e-way bills and bogus registrations.
The GST Network (GSTN) has been instrumental in providing crucial intelligence that aids in tracing fake entities across states.
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