GST authorities have cracked down on ₹15,851 crore in fraudulent Input Tax Credit (ITC) claims between April and June of the current fiscal year. This marks a significant 29% increase in detected fraud compared to the same period last year.
Officials also uncovered 3,558 fake firms involved in these schemes, leading to 53 arrests and the recovery of ₹659 crore. While the number of fake firms detected was slightly lower than last year, authorities believe this indicates the success of ongoing drives against fraudulent GST registrations.
The Fight Against Fake ITC: A Closer Look
Fraudulent ITC claims have been a persistent challenge for GST administration. Unscrupulous individuals create shell companies solely to claim ITC and defraud the government.
In the first quarter of fiscal year 2025, GST officers had detected ₹12,304 crore in fake ITC involving 3,840 fake firms. This year’s figures show a concerning rise in the value of fraudulent claims, even with fewer fake firms detected.
Enhanced Scrutiny and Enforcement
To combat this menace, the GST registration process has been significantly tightened. While low-risk businesses can still get GST registration within seven days, applicants flagged as risky by data analytics now face mandatory physical verification and Aadhaar authentication.
Additionally, the GST Act provides for strict penalties, including:
- Punishment for wrongly availed ITC.
- Suspension or cancellation of registration for taxpayers involved in fake ITC cases.
- Blocking of ITC in electronic credit ledgers.
- Provisional attachment of property and bank accounts to recover government dues.
A panel of state finance ministers, led by Goa Chief Minister Pramod Sawant, is also actively studying tax evasion in specific sectors to devise further strategies to curb ITC fraud.