Central tax authorities detected input tax credit (ITC) fraud worth ₹74,781.56 crore across 30,162 cases in FY26, as reported by the Ministry of Finance to the Rajya Sabha. This represents more than double the number of cases from the previous year, with fraud cases spanning both goods and services sectors including iron and steel, textiles, plastics, paper products, plywood, cement, copper, works contract services, manpower supply and real estate services. The fraud detection totaled nearly ₹1.7 lakh crore over three years, with 358 persons arrested during this period, according to Minister of State for Finance Pankaj Chaudhary's written reply to Parliament.
Gujarat recorded the highest number of cases at 12,511 involving ₹12,632.88 crore and 55 arrests, followed by Maharashtra with 9,629 cases but the largest detection amount of ₹18,319.62 crore and 54 arrests. Delhi reported 1,197 cases worth ₹10,136.96 crore with the highest number of arrests at 74. Other significant detections included Uttar Pradesh (₹4,751.97 crore), West Bengal (₹5,654.09 crore), Telangana (₹3,154.84 crore), Karnataka (₹3,063.26 crore) and Haryana (₹2,845.41 crore).
The significant increase in fraud detections reflects strengthened enforcement capabilities through the introduction of the Invoice Management System (IMS) on the GST portal in late 2024, enabling recipients to accept, reject or keep invoices pending and reconcile them with suppliers' GSTR-1 filings. Two all-India special drives against fake registrations and fraudulent ITC were conducted between May and August 2023 and August and October 2024 by both Central and State tax administrations. Biometric-based Aadhaar authentication for GST registration has been extended across the country, with applicants who don't opt for Aadhaar authentication required to visit a GST Suvidha Kendra for photograph and document verification.
The government also detected 1,517 fake GST registrations in FY26 involving ₹9,940 crore in ITC fraud, with 60 people arrested and seven accused remaining absconding. This represents a significant decline from 3,977 fake registrations worth ₹13,109 crore detected in FY25 and 5,699 registrations worth ₹15,085 crore in FY24. These fake registrations were created using forged PAN and Aadhaar cards, with the government noting that authorities did not specify the sectors in which these fake registrations were concentrated but said the broader ITC fraud cases spanned manufacturing as well as service industries.
According to the Ministry of Finance data, 15,283 cases involving ₹58,772.51 crore were detected in FY25, while 9,190 cases amounting to ₹36,373.36 crore came to light in FY24. The government also reported a decline in fake GST registrations, with 1,517 such registrations involving ₹9,940 crore detected in FY26, compared to 3,977 fake registrations worth ₹13,109 crore in FY25 and 5,699 registrations worth ₹15,085 crore in FY24. Filing of GSTR-1 has been made mandatory before GSTR-3B from October 1, 2022, along with sequential filing of returns.
