Fake Firms, Real Fallout: GST Officers Unmask India’s ITC Illusionists

Image Source: The New Indian Express

India's Goods and Sales Tax (GST) authority has detected a whopping Rs 15,851 crore of bogus input tax credit (ITC) claims in the first quarter of FY26, a 29 percent year-on-year rise from the same period last year. The drive is an indication of stepped-up efforts to sanitize the tax system and discourage bogus registrations.

Key observations of the April–June quarter:

3,558 fake companies were discovered, which is lower than the 3,840 found in Q1 FY25

Even numerically smaller, the scale of fraud per company has grown enormously

53 people were arrested and Rs 659 crore were seized, and 26 people were arrested and Rs 549 crore were seized last year

The FY25 cumulative detection was 25,009 fake firms and Rs 61,545 crore of fake ITC

Enforcement and reforms:

There have been two nation-wide campaigns to purge non-existent GST registrants

The registration process has been made more stringent with compulsory Aadhaar validation and physical checks for suspicious applicants

Risk assessment based on data analysis now guides registration schedules and probe intensity levels

The GST Act provides suspension of registrations, blocking of ITC ledgers, and provisional attachment of assets for recovery of dues.

Policy response and future direction:

A panel led by Goa Chief Minister Pramod Sawant is studying sector-wise trends of tax evasion

The success of the recent efforts suggests improved detection mechanisms and stronger deterrents

Authorities are calling for tracking masterminds and dismantling organized ITC fraud rings

Sources: Moneycontrol, Business Standard, Financial Express, The Hindu, Economic Times, MSN India, The Hindu BusinessLine, New Indian Express