The Delhi High Court has directed authorities nationwide to make biometric Aadhaar authentication mandatory for all Goods and Services Tax registrations, aiming to curb the widespread use of stolen and inactive identity credentials. A Division Bench comprising Justice Anil Khetarpal and Justice Shail Jain noted that the exploitation of innocent citizens’ documents causes substantial revenue losses to the exchequer while subjecting genuine individuals to unwarranted tax liabilities and administrative harassment.
Massive Evasion Detected Across Two Financial Years
The court examined official data presented by the Minister of State for Finance in the Rajya Sabha, revealing that 4,454 fraudulent GST registrations were uncovered over the past two financial years. These illicit registrations, generated through stolen or inactive PAN and Aadhaar details, were linked to tax evasion totaling ₹28,194 crore. Specifically, the authorities detected 2,800 fraudulent entities involving ₹15,085 crore in evasion during 2023-24, followed by 1,654 cases tied to ₹13,109 crore in 2024-25.
The Bench observed that although tax authorities had previously reported making biometric Aadhaar-based authentication mandatory, the safeguard remained incompletely enforced after more than a year. Counsel representing the authorities conceded that biometric checks were restricted solely to applicants flagged as high-risk by analytical models, while failing to identify any practical barriers preventing universal implementation across the country.
Stringent Measures Proposed to Protect Genuine Citizens
The judicial intervention arose from petitions filed by affected individuals, including one petitioner whose PAN and Aadhaar credentials were used without her consent to secure a GST registration. Expressing deep concern over the vulnerability of unsuspecting citizens to large-scale liability for businesses they do not own, the Bench called for the urgent adoption of systematic barriers against shell firms.
Senior Advocate Tarun Gulati submitted several comprehensive recommendations to reinforce the verification framework. These proposals include matching applicant photographs with the Aadhaar database through facial recognition, conducting video verification of identity documents, recording IP addresses and physical device locations during filing, and performing mandatory physical inspections of principal places of business.
Real-Time Alerts and Enhanced Oversight Recommended
Further systemic safeguards urged the tax administration to establish real-time data linkages with the Income Tax Department to instantly notify PAN holders whenever an application uses their numbers. The suggestions also advocate for direct confirmation requests sent to Aadhaar holders, notifications routed via DigiLocker, and enhanced automated filters capable of catching document mismatches or unusual spikes in declared business turnover.
To deter criminals from establishing shell companies for fraudulent invoicing and tax avoidance, the court directed the authorities to thoroughly examine the suggested measures. The Bench permitted officials to formally present any operational challenges regarding universal biometric rollout before the court, scheduling the proceedings for further consideration on September 22.
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