CGST Officers Detect ?1.88 Trillion in GST Evasion from April to December 2024

Massive Tax Evasion Uncovered Amid Increased Enforcement Efforts

In a significant crackdown on tax fraud, Central Goods and Services Tax (CGST) officers detected GST evasion amounting to ?1.88 trillion during the period from April to December 2024. This staggering figure highlights the scale of tax evasion in India, as authorities ramp up efforts to combat fraudulent practices, fake invoicing, and input tax credit (ITC) manipulation.

The enforcement drive has led to the arrest of over 350 individuals and recovery of ?1.36 trillion in tax dues so far. Officials state that advanced data analytics, artificial intelligence-based monitoring, and real-time verification techniques have been instrumental in identifying these irregularities.

Breakdown of the ?1.88 Trillion GST Evasion

According to official sources, the ?1.88 trillion detected comprises various types of tax evasion, including:

Fake Input Tax Credit (ITC) claims: ?1.12 trillion
Under-reporting of taxable sales: ?40,000 crore
Suppression of turnover by businesses: ?18,500 crore
Fake GST registrations linked to shell companies: ?11,000 crore
Non-payment of collected GST: ?7,500 crore

A senior CGST officer stated:

“The scale of GST fraud has increased due to sophisticated methods used by tax evaders. However, with technological advancements, our detection rate has improved significantly. The government is committed to ensuring strict action against those attempting to defraud the system.”

Major GST Fraud Cases Detected

During the enforcement operations, several high-profile cases of GST evasion came to light, including:

1. Fake ITC Claims Worth ?3,500 Crore in Maharashtra

Authorities in Mumbai and Pune unearthed a network of over 200 fake companies issuing bogus invoices to fraudulently claim ITC without any actual business transactions. Investigators found layered financial transactions across multiple bank accounts, revealing a complex money-laundering racket.

2. ?5,000 Crore Tax Fraud by E-commerce and Retailers

In a separate case, tax authorities discovered that several e-commerce firms and large retail chains were under-reporting their actual turnover. The investigation exposed instances where businesses misclassified goods under lower tax brackets to reduce GST liability.

3. Pan-India Crackdown on Shell Companies

CGST officials identified over 12,000 shell companies involved in fake invoicing, leading to fraudulent ITC claims. Many of these companies were found operating without any physical existence, merely set up to generate false tax credits for businesses attempting to lower their tax outgo.

4. Unpaid GST by Hospitality and Service Sectors

Luxury hotels, restaurants, and service providers were found charging GST from customers but failing to deposit the tax with the government. A major hotel chain was found to have evaded ?650 crore in GST dues, leading to a comprehensive audit and subsequent legal action.

Government’s Response and Stringent Measures

The Finance Ministry has acknowledged that GST evasion remains a serious challenge but has reassured that intensified enforcement and policy reforms are curbing the menace. Some of the key steps taken include:

1. AI-Powered GST Surveillance System

The government has integrated AI and data analytics tools to identify suspicious transactions, helping tax officers detect fake invoices, mismatched ITC claims, and tax under-reporting in real time.

2. Mandatory Biometric Verification for New GST Registrations

To prevent shell companies and fraudulent GST registrations, the GST Council has made biometric authentication mandatory for businesses applying for new GST numbers. This move aims to eliminate fake entities used for tax frauds.

3. Stricter Compliance and Higher Penalties

The penalty for fake ITC claims has been increased to 200% of the tax evaded, discouraging fraudulent practices.
Threshold for e-invoicing has been lowered to ?5 crore, ensuring better compliance among small and medium enterprises (SMEs).
Fast-track prosecution of tax fraudsters to deter repeat offenders.

4. Close Monitoring of High-Risk Sectors

Sectors like real estate, e-commerce, luxury goods, hospitality, and manufacturing are under greater scrutiny, as they have been identified as hotspots for GST evasion.

Economic Impact of GST Evasion

GST evasion significantly affects government revenues, leading to lower tax collections, higher fiscal deficits, and reduced resources for public welfare schemes. Experts estimate that tax fraud costs the Indian economy nearly ?2.5 trillion annually, impacting infrastructure projects, healthcare, and education funding.

A senior economist noted:

“If tax evasion is reduced by even 30-40%, India’s fiscal health would improve drastically. More revenue would mean increased spending on critical sectors, boosting economic growth and employment generation.”

What’s Next?

With the ?1.88 trillion tax fraud detection, the government is expected to further tighten GST compliance norms. The next phase of enforcement may include:

Automated tax reconciliation systems to prevent mismatches in ITC claims.
Strict action against accountants, tax professionals, and auditors facilitating tax fraud.
Linking GST data with income tax records to identify businesses reporting different turnovers under different tax regimes.
Integration of blockchain technology to create tamper-proof GST invoices and prevent fake ITC claims.

As authorities intensify their efforts, businesses must ensure complete compliance with GST regulations to avoid penalties, legal action, and reputational damage.