Central and state GST officers have uncovered 25,009 fake firms involved in fraudulently claiming input tax credit (ITC) worth ₹61,545 crore during the fiscal year 2024-25. These findings are part of ongoing efforts to tackle GST fraud.
ITC Fraud Recovery and Arrests
Throughout the 2024-25 fiscal year, authorities managed to recover ₹1,924 crore by blocking fraudulent ITC claims and made 168 arrests in connection with these cases.
Overview of ITC Fraud in 2023-25
Between 2023 and 2025, a total of 42,140 fake firms were identified, generating fraudulent ITC of over ₹1.01 lakh crore. During this period, ₹3,107 crore was recovered through ITC blockages, and 316 individuals were arrested.
Preventive Measures Against Fake ITC Claims
In response to rising ITC frauds, the government, GSTN, and other relevant authorities have implemented several measures. These include providing intelligence inputs, detecting suspicious e-way bill activities, and preventing fraudulent GST registrations.
Understanding ITC
Under the Goods and Services Tax (GST) system, ITC allows businesses to claim a deduction on taxes paid for purchases made from suppliers. Fraudulent ITC claims, however, have been a significant challenge, with fake firms created solely to generate these claims.
Stringent GST Registration Process
To prevent such fraud, the GST registration process has been tightened. Non-risky businesses are registered within 7 days, while risky applicants undergo mandatory physical verification and Aadhaar authentication to prevent fraudulent registrations.
Enforcement and Legal Actions
The GST Act includes strict measures for dealing with fake ITC, such as penalties for wrongly availed ITC, suspension or cancellation of registrations, and provisional attachment of properties or bank accounts to recover government dues.
Efforts to Improve Enforcement
To enhance enforcement, two national conferences have been held, bringing together enforcement chiefs from both state and central GST formations. These conferences focused on ongoing enforcement activities and stressed the importance of balancing compliance with ease of doing business.
