The Ministry of Finance informed the Rajya Sabha that central tax authorities detected input tax credit (ITC) fraud worth ₹74,781.56 crore across 30,162 cases during FY 2025–26, with the number of detected cases more than doubling compared to the previous financial year.
Input Tax Credit (ITC) allows registered businesses to claim credit for the Goods and Services Tax (GST) paid on purchases, which can be adjusted against the GST payable on their outward supplies.
Pankaj Chaudhary, Minister of State for Finance, stated that 15,283 cases involving Rs 58,772.51 crore (Rs 0.59 trillion) were detected in FY25, while 9,190 cases of Rs 36,373.36 crore (Rs 0.36 trillion) were revealed in FY24. In three years, detections by Central Tax formations totalled nearly Rs 1.7 lakh crore, with 718 persons arrested.
The cases of fraud are spread across 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 State of Gujarat in FY26 has recorded the highest number of cases, i.e., 12,511, which includes Rs 12,632.88 crore and 55 arrests.
After Gujarat, Maharashtra reported 9,629 ITC fraud cases, involving the highest detected amount of ₹18,319.62 crore, along with 54 arrests. Delhi recorded 1,197 cases involving ₹10,136.96 crore in fraudulent ITC claims and registered the highest number of arrests, with 74 individuals taken into custody.
Other states with detections included Uttar Pradesh (Rs 4,751.97 crore), West Bengal (Rs 5,654.09 crore), Telangana (Rs 3,154.84 crore), Karnataka (Rs 3,063.26 crore) and Haryana (Rs 2,845.41 crore).
The government separately reported a reduction in bogus GST registrations received through forged PAN and Aadhaar cards. In FY26, 1,517 registrations were detected, involving Rs 9,940 crore. 60 individuals were arrested, and seven masterminds are still absconding.
This is compared to 3,977 fake registrations (Rs 13,109 crore, 50 arrests, two absconding) in FY25 and 5,699 registrations (Rs 15,085 crore, 67 arrests, 14 absconding) in FY24.
Chaudhary emphasised several measures adopted to curb ITC fraud. The Invoice Management System (IMS) was rolled out on the GST portal in late 2024, which allows receivers to accept, reject, or keep invoices pending and reconcile them with suppliers’ GSTR-1 filings.
Between May and August 2023 and August and October 2024, two all-India special drives against fake registrations and fraudulent ITC were organised by Central and State tax administrations. Biometric-based Aadhaar authentication for GST registration has been implemented across the country.
Applicants who choose not to use Aadhaar authentication must visit a GST Suvidha Kendra for photo and document verification, as required by an amendment to Rule 8(4A) of the CGST Rules. Starting from October 1, 2022, it has become mandatory to file GSTR-1 before filing GSTR-3B.
Additionally, returns must be filed sequentially to ensure that the invoice details provided by suppliers automatically populate the available ITC in GSTR-2B.
“ITC is the driver of the GST, but when invoices are absent from genuine supplies, it becomes the tax system’s most substantial revenue vulnerability. The surge in detection shows the scale of fraud but also a decisive transformation in legislative capability. The cases nearly doubled from 15,283 to 30,162 in FY26, while average detection per case has reduced, which indicates that authorities are determining a wider and more granular universe of fraud.”
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“Data analytics tools like Advanced Analytics in Indirect Taxes (ADVAIT) and Business Intelligence and Fraud Analytics (BIFA) determine anomalous credit flows, circular trading and shell entities across networks. Simultaneously, system-generated mismatch alerts and scrutiny of GSTR-3B against GSTR-2A or GSTR-2B force taxpayers to reconcile credits; unresolved or unsupported differences can progress to show-cause proceedings, which support authorities to differentiate timing or documentation gaps from ineligible or fake credit. Separately, the track-and-trace architecture linking e-invoices, e-way bills and GST returns assesses whether credit is backed by supply, goods movement and tax payment. Special drives, biometric authentication and invoice-level reconciliation have made detection effective, showing a materially robust detection apparatus.”
