ITC Scam Alert: GST Officers Uncover Rs 15,851 Crore Fraud In First Quarter Of FY26
Notably, the number of fake firms identified during this time dropped to 3,558 from 3,840 in the first quarter in preceding FY25, signalling potential progress in curbing fraudulent registrations.
GST authorities have flagged a concerning spike in fake input tax credit (ITC) claims amounting to Rs 15,851 crore during the April–June quarter of the current financial year, marking a 29 per cent increase over the same period last year.
Interestingly, the number of fake firms identified during this time dropped to 3,558 from 3,840 in the April-June quarter in preceding 2024-25 fiscal year, signalling potential progress in curbing fraudulent registrations, reported PTI.
Officials said that the sustained crackdown against fictitious GST registrations may be showing early signs of success. “The number of fake firm detection in the April-June period is less compared to last year, which shows that the drive against fake GST registration has worked,” an official noted.
Fewer Firms, Bigger Frauds: The ITC Challenge Persists
Despite the decline in fake entities, the value of ITC fraud rose sharply. In the June quarter alone, GST officers arrested 53 individuals and recovered Rs 659 crore. In contrast, the same quarter last year saw 26 arrests and Rs 549 crore in recoveries. The latest figures suggest that while the number of bogus firms is falling, the scale of fraud per firm is rising.
Under the GST system, ITC allows businesses to claim credits for taxes paid on input purchases. However, fraudulent claims have long plagued the system, prompting repeated nationwide drives to weed out non-existent firms. In FY25, authorities detected 25,009 such entities passing on ITC fraudulently worth Rs 61,545 crore.
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Ongoing Reforms and Tighter Vetting Mechanisms
To combat these schemes, the GST registration process has become more stringent. Applications deemed risky by data analytics undergo physical verification and Aadhaar authentication. Genuine businesses can expect approval within seven days, while suspect entities face detailed scrutiny.
As part of enforcement, the GST Act permits suspension or cancellation of registrations, blocking of ITC in credit ledgers, provisional attachment of assets, and prosecution of offenders. The measures aim not only to dismantle the fake ITC network but also to trace the masterminds behind these operations.
Meanwhile, a group of state finance ministers led by Goa Chief Minister Pramod Sawant continues to explore sector-specific tax evasion patterns to suggest further safeguards against ITC fraud.
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