Crackdown on Fake GST: 489 Fraudulent PAN-Aadhaar Registrations Identified by October

A recent crackdown on tax fraud has revealed 489 fraudulent Goods and Services Tax (GST) registrations within a six-month period, resulting in an estimated tax evasion of over Rs 3,000 crore. The government, in a statement to Parliament, emphasized its commitment to data-driven enforcement strategies. This initiative is part of a broader effort to combat a significant legacy issue, as authorities have identified nearly 4,000 fake GST registrations since the start of the 2024–25 fiscal year, amounting to a staggering Rs 13,109 crore in evaded taxes.

Intensified Scrutiny of GST Registrations

Minister of State for Finance Pankaj Chaudhary informed the Lok Sabha that the Directorate General of Analytics and Risk Management (DGARM) has ramped up its examination of digital data submitted during GST registrations. This heightened scrutiny particularly targets proprietorship firms, where the risk of fraudulent activity is perceived to be higher. The process involves analyzing registration data for inconsistencies and potential red flags, especially in cases where personal identification numbers, such as PAN, may have been misused. Chaudhary explained that GST registrations suspected of misuse are flagged and forwarded to field formations for thorough verification.

Targeting Fake Invoicing and Input Tax Credit Abuse

In addition to addressing forged identities, the government’s efforts extend to identifying entities that exist solely to facilitate fraudulent invoicing and the improper flow of input tax credit (ITC) through the supply chain. The DGARM is concentrating on high-risk taxpayers who are essentially fictitious and are used to transfer ineligible ITC. This proactive approach aims to dismantle networks that exploit the GST system for financial gain, ensuring that only legitimate businesses benefit from tax credits.

Enforcement Actions and Nationwide Drives

The enforcement actions resulting from these analytical checks have been significant. Between April and October of this year, GST officers arrested 16 individuals linked to fake registrations. This figure is part of a larger trend, with 50 arrests made in the current fiscal year and 67 in the previous year, indicating a sustained effort to dismantle organized tax fraud networks. Furthermore, the Centre and state governments have collaborated on nationwide initiatives to eliminate non-existent firms. Two major operations were conducted between May and August 2023 and again from August to October 2024, involving both central and state tax administrations.

During these operations, tax officials conducted physical verifications of business premises to identify and suspend or cancel non-existent GST registrations. Chaudhary highlighted the importance of these drives in maintaining the integrity of the GST system and ensuring that only legitimate businesses operate within the framework. The government’s ongoing commitment to tackling tax fraud reflects a broader strategy to enhance compliance and protect the nation’s revenue.

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