Massive GST ITC Scam Exposed: Govt Uncovers Rs 1.19 Lakh Crore Fraud in Just 3 Years

The Ministry of State in the Ministry of Finance (Shri Pankaj Chaudhary) has responded to a question raised in Lok Sabha (lower house of India’s Parliament) by Mr. Shri Vishnu Dayal Ram and Mr. Shri Kanwar Singh Tanwar regarding “ITC Fraud Detection”. They answered the questions on Monday, August 11, 2025.

The questions are mentioned below:

a) Whether many fraudulent cases of claiming Input Tax Credit (ITC) in GST have come to the notice of the Government.

b) if so, the details of the numbers of cases registered, the amount involved and the recovery made; and

c) the proactive steps taken by the Government to prevent and tackle the fraudulent cases of claiming ITC benefits?

Here’s the breakdown of the answers provided by the Ministry of Finance (Shri Pankaj Chaudhary):

a) & b) Yes. The details of the cases of ITC fraud registered by Central tax formation during the last three Financial Years are as under:

c) Following are the steps taken by the Government to prevent and tackle the fraudulent cases of claiming ITC:

i. Input tax credit can only be availed in regard to such invoices or debit notes which have been completed by the supplier in FORM GSTR-1 and details of which have been discussed with the registered person in FORM GSTR-2B.

ii. A registered person is not permitted to file FORM GSTR-1, if he/she has not furnished a return in FORM GSTR-3B for the preceding tax period.

iii. Filing of Form GSTR-1 is made compulsory before filing of FORM GSTR-3B for a tax period and filing of FORM GSTR-1 has been made mandatorily sequential.

iv. The electronic invoicing system (r-invoice) has also been mandatory for all B2B payments for businesses with turnover exceeding Rs. 5 crores.

v. Verification of PAN through OTP on mobile number at time of registration and email address linked with PAN. This will help in preventing GST registration using the PAN of other people without their knowledge.

vi. Biometric-based Aadhaar authentication of registration applicants

vii. An applicant who has not opted for Aadhaar authentication will also be required to visit GST Suvidha Kendra for the taking of a photograph and for document verification.

viii. Physical verification in high-risk cases, even when Aadhaar has been authenticated.

ix. Bank account details will be required to be complete within 30 days of the grant of registration or before the filing of FORM GSTR-1/IFF, whichever comes first.

x. System-based measures such as:

• suspension of the registration in respect of such registered people who do not furnish the details of a valid bank account within the time prescribed.
• The requirement of GE0-tagging of the place of business of the applicant for the new registrations has been provided on the portal.
• Suspension of registrations concerning persons who default in the timely filing of returns is carried out in terms of the provisions of rule 21A of the CGST Rules, 2017.
• Automated notices under 88C/88D in the form of DRC-01B and DRC-01C are being issued.

xi. The new provisions make it clear that availing ITC through fraudulent means without real invoice or bill is a non-releasable offence.

xii. It is beneficial for whoever retains the benefit or at whose instance a supply has been made without the issuance of an invoice, or an invoice has been issued without a supply or excess ITC has been availed/distributed to be liable for a penalty.

xiii. the Invoice Management System (IMS) is a convenient system launched on the GST portal in late 2024, with main objective to help recipient taxpayers manage incoming invoices more effectively. It permits recipients to accept, reject or mark invoices as pending when these are saved or filed by their supplier taxpayers. With the execution of IMS, registered recipients can now cross-verify and reconcile invoices reported by suppliers in their GSTR-1.

xiv. A particular drive against fake Input Tax Credit and fake registration was launched with main motive to remove fake registrations during period May 16, 2023, to July 15, 2023, and August 16, 2024 to October 15, 2024, in coordination between State and Central GST administrations.