Fake GST Input Tax Credit claims jump 29% to ₹15,851 crore in Q1; 53 arrested
New Delhi: GST authorities detected fake input tax credit (ITC) claims amounting to ₹15,851 crore in the April–June quarter of FY26, marking a 29% increase over the same period last year, even though fewer bogus firms were identified, PTI reported, citing officials.
Central and state GST officers uncovered 3,558 fake firms during the first quarter, compared to 3,840 such entities in Q1 of FY25.
A panel of state finance ministers, chaired by Goa Chief Minister Pramod Sawant, is currently reviewing tax evasion patterns across sectors and exploring ways to curb ITC fraud.
“Roughly 1,200 fake firms are being busted each month. The year-on-year dip in fake firm detection for Q1 suggests that the clampdown on bogus GST registrations has yielded results,” an official said.
According to the data for the June quarter of FY26, ₹15,851 crore worth of fake ITC was passed through 3,558 fake firms.
During this period, 53 people were arrested, and ₹659 crore was recovered.
In comparison, ₹12,304 crore in fake ITC involving 3,840 fake firms was detected in the first quarter of FY25. That operation led to 26 arrests and the recovery of ₹549 crore.
Under the Goods and Services Tax framework, ITC refers to the tax paid on business inputs, which can be claimed against the output tax owed.
Curbing fake ITC claims has been one of the major enforcement challenges, as fraudsters continue to create shell firms solely to exploit input tax credit provisions and siphon funds from the exchequer.
In 2024–25, authorities detected 25,009 fake firms that fraudulently passed on ITC worth ₹61,545 crore.
Two pan-India drives were carried out to weed out fake registrations under GST.
In the first such campaign (May 16 to July 15, 2023), 21,791 GST-registered entities were found non-existent, unearthing suspected tax evasion of ₹24,010 crore.
In the second phase (April 16 to October 30, 2024), about 18,000 fake firms were detected, linked to estimated evasion of ₹25,000 crore. Following this, the registration process was tightened, especially for applicants flagged as ‘risky’ by data analytics.
Non-risky entities are still granted registration within seven days, but physical verification and Aadhaar authentication have been made mandatory for flagged applicants.
To crack down on fraud, the GST Act allows for penalties on wrong ITC claims, suspension or cancellation of GST registration, blocking of electronic credit ledgers, and provisional attachment of bank accounts and properties for recovery.
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