Goods and Services Tax (GST) authorities have detected fraudulent input tax credit (ITC) claims worth ₹15,851 crore between April and June 2025, marking a significant escalation in enforcement efforts in the first quarter of the current financial year.
The Directorate General of GST Intelligence (DGGI) and other field units unearthed 3,558 fake firms involved in generating fictitious invoices and misusing ITC provisions without actual movement of goods or services. This large-scale evasion has prompted authorities to ramp up verification measures and initiate strict legal action against offenders.
According to the Finance Ministry, the detection represents a 37% increase compared to last year’s quarter. The rise in such fraudulent claims is seen as a response to tightening compliance systems and data analytics tools that are helping the GST Network (GSTN) identify anomalies in filings and transactions.
Fake Firms and Bogus Invoices
Officials say the primary modus operandi involved the creation of shell companies and the layering of transactions across jurisdictions to generate fake invoices. These invoices were then used to falsely claim ITC by entities that never actually received the goods or services.
“The use of advanced data mining tools and cross-portal tracking has improved our capacity to flag suspicious transactions. Many of these shell entities were operating in clusters, with masterminds routing funds and documents from one to another to evade detection,” said a senior GST official.
Multiple arrests have already been made across Maharashtra, Gujarat, West Bengal, and Delhi in connection with the fraud. Investigations are ongoing, and recovery proceedings have been initiated under the GST Act, which allows for provisional attachment and reversal of credit.
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Policy Push for Real-Time Tracking
The surge in fake ITC claims has also accelerated the government’s push for real-time e-invoice verification and tighter onboarding norms for new GST registrations. Officials hinted that the next phase of compliance measures will involve facial recognition tools and geotagging of business premises to further curb fake entity creation.
Experts say that while the crackdown may create temporary operational hurdles for small businesses, it is essential to preserve the integrity of the GST regime and prevent cascading tax revenue losses.