Executive Summary:
The Ministry of Finance addressed concerns regarding fraudulent Input Tax Credit (ITC) claims under GST. The response details the number of ITC fraud cases registered over the past three financial years (2022-2025) and outlines proactive steps taken by the government to prevent and tackle such fraudulent activities, including system-based measures and special drives.
Key Points / Main Content:
ITC Fraud Statistics:
* Registered ITC fraud cases by Central tax formations:
* 2022-23: 7231 cases, Rs. 24140 Cr. involved, Rs. 2484 Cr. voluntary payment.
* 2023-24: 9190 cases, Rs. 36374 Cr. involved, Rs. 3413 Cr. voluntary payment.
* 2024-25: 15283 cases, Rs. 58772 Cr. involved, Rs. 2675 Cr. voluntary payment.
Preventative and Corrective Measures:
* ITC can only be availed on invoices/debit notes furnished by the supplier in FORM GSTR-1 and communicated to the registered person in FORM GSTR-2B.
* Restrictions on filing FORM GSTR-1 if FORM GSTR-3B for the preceding tax period is not furnished.
* Mandatory sequential filing of FORM GSTR-1 before FORM GSTR-3B.
* Mandatory e-invoicing for B2B transactions for businesses with turnover exceeding Rs. 5 crore.
* OTP based PAN verification on mobile number and email at the time of registration.
* Risk-based biometric-based Aadhaar authentication of registration applicants.
* Physical verification in high-risk cases, even with Aadhaar authentication.
* Bank account details required within 30 days of registration or before filing FORM GSTR-1/IFF.
* System-based measures:
* Suspension of registration for failure to furnish valid bank account details.
* Suspension for default in timely filing of returns (Rule 21A of CGST Rules, 2017).
* Requirement of Geotagging of the place of business for new registrations.
* Automated notices under Rule 88C/88D in form of DRC-01B and DRC-01C.
* Fraudulent ITC availment without invoice is now a cognizable and non-bailable offense.
* Penalties for beneficiaries who retain benefits from supplies made without invoices or excess ITC availment.
* Invoice Management System (IMS) to allow recipients to manage, accept, reject, or mark invoices as pending to reconcile supplier GSTR-1 filings, enhancing ITC claim process.
* Special drives against fake ITC and registration conducted from 16th May, 2023 to 15th July, 2023 and 16th August, 2024 to 15th October, 2024.
Impact Analysis:
Registered Taxpayers (Suppliers):
Impact: Must accurately furnish details in FORM GSTR-1 and ensure communication to recipients via FORM GSTR-2B. Required to adopt e-invoicing if turnover exceeds Rs. 5 crore. Subject to potential suspension for non-compliance with filing requirements.
Action Required: Comply with mandatory e-invoicing requirements, ensure timely and accurate filing of GSTR-1 and GSTR-3B, and properly manage invoices.
Registered Taxpayers (Recipients):
Impact: Can only claim ITC on invoices furnished by suppliers and reflected in FORM GSTR-2B. Enhanced ability to manage incoming invoices through the Invoice Management System (IMS).
Action Required: Utilize IMS to verify and reconcile invoices, ensure suppliers are compliant, and only claim eligible ITC.
New Registration Applicants:
Impact: Subject to OTP-based PAN verification, potential Aadhaar authentication, physical verification in high-risk cases, and Geotagging of business place.
Action Required: Provide accurate information, complete Aadhaar authentication if required, prepare for potential physical verification, and provide bank account details promptly.
Government (Central and State GST Administrations):
Impact: Responsible for implementing and enforcing the new measures, conducting special drives, and monitoring compliance.
Action Required: Continue special drives against fake ITC, monitor compliance, and refine system-based measures.
Key Entities Referenced
Input Tax Credit (ITC): A tax credit claimed on inputs used in the production of goods and services; a key element in GST fraud cases.
Goods and Services Tax (GST): An indirect tax used in India on the supply of goods and services.
Shri Pankaj Chaudhary: Minister of State in Ministry of Finance, who provided the answer to the Lok Sabha question.
FORM GSTR1: A monthly return that summarizes all outward supplies (sales) of a registered GST taxpayer.
FORM GSTR2B: An auto-generated statement containing details of eligible Input Tax Credit (ITC) for a registered person.
FORM GSTR3B: A self-declared summary return filed monthly, containing details of outward supplies, input tax credit claimed, tax payable, and taxes paid.
CGST Rules, 2017: Central Goods and Services Tax Rules, 2017 which contains rules pertaining to the GST law.
GST Suvidha Kendra: Facilitation centers for GST-related services.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
LOK SABHA
UN-STARRED QUESTION NO. 3670
ANSWERED ON MONDAY, AUGUST 11, 2025
“ITC FRAUD DETECTION”
3670. Shri Vishnu Dayal Ram:
Shri Kanwar Singh Tanwar:
Will the Minister of FINANCE be pleased to state:
(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, amount involved and recovery made;
and
(c) the proactive steps taken by the Government to prevent and tackle the fraudulent cases of
claiming ITC benefits?
ANSWER
MINISTER OF STATE IN MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) & (b) : Yes Sir. The details of the cases of ITC fraud registered by Central tax formations
during the last three Financial Years are as under:
Period No. of Detection Voluntary
cases (Rs. in Payment
Cr.) (Rs. in
Cr.)
2022-23 7231 24140 2484
2023-24 9190 36374 3413
2024-25 15283 58772 2675
(c) The proactive steps taken by the Government to prevent and tackle the fraudulent cases of
claiming ITC are as under:
i. Input tax credit can only be availed in respect of such invoices or debit notes which have
been furnished by the supplier in FORM GSTR-1 and details of which have been
communicated to the registered person in FORM GSTR-2B.
ii. A registered person is not allowed to furnish FORM GSTR-1, if he has not furnished
return in FORM GSTR-3B for the preceding tax period.iii. Filing of FORM GSTR-1 is made mandatory before filing of FORM GSTR-3B for a tax
period and filing of FORM GSTR-1 has been made mandatorily sequential.
iv. Electronic invoicing system (e-invoice) has been made mandatory for all B2B
transactions for businesses with turnover exceeding Rs. 5 crore.
v. OTP based verification of PAN on mobile number at time of registration and email address
linked with PAN. This will help in preventing GST registration using PAN of other persons,
without their knowledge.
vi. Risk based 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 taking of photograph and for document verification.
viii. Physical verification in high-risk cases, even when Aadhaar has been authenticated.
ix. Details of bank account will be required to be furnished within 30 days of grant of
registration or before filing of FORM GSTR-1/ IFF, whichever is earlier.
x. System-based measures like:
a. suspension of the registration in respect of such registered persons who do not furnish
the details of valid bank account within the time period prescribed.
b. suspension of registrations pertaining to registered persons who default in timely filing
of returns is carried out in terms of provisions of rule 21A of the CGST Rules, 2017.
c. the requirement of Geo-tagging of the place of business of the applicant for the new
registrations has been provided on the portal.
d. Automated notices under Rule 88C/88D in form of DRC-01B and DRC-01C are being
issued.
xi. Offence of fraudulent availment of ITC without invoice or bill is now cognizable and
nonbailable offence.
xii. Beneficiary, who retains benefit or at whose instance a supply has been made without the
issuance of an invoice, or invoice has been issued without supply, or excess ITC has been
availed/distributed, has been made liable for penalty.
xiii. The Invoice Management System (IMS) is a functionality introduced on the GST portal
in late 2024, designed to help recipient taxpayers manage incoming invoices more effectively.
It allows recipients to accept, reject, or mark invoices as pending when these are saved or filed
by their supplier taxpayers. With the implementation of IMS, registered recipients can now
cross-verify and reconcile invoices reported by suppliers in their GSTR-1, thereby
streamlining and strengthening the ITC claim process.
xiv. To weed out fake/bogus registrations, a special drive against fake Input Tax Credit and
fake registration was launched during the period from 16th May, 2023 to 15th July, 2023 and
16th August, 2024 to 15th October, 2024 in coordination between State and Central GST
administrations.
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