Massive ₹7.08 lakh crore GST evasion unearthed in 5 years, with ₹1.79 lakh crore in input tax credit fraud

In a significant revelation in the Lok Sabha, Minister of State for Finance Pankaj Chaudhary disclosed that a staggering ₹7.08 lakh crore worth of GST evasion has been detected by authorities over the last five financial years. Of this, ₹1.79 lakh crore pertains to input tax credit (ITC) fraud, highlighting the scale of tax manipulation under the Goods and Services Tax regime.

The data, shared by the Ministry of Finance, exposes deep-rooted misuse of the GST system, especially through fake invoicing, circular trading, and the creation of shell companies, which continue to burden India's indirect tax structure.

₹2.23 lakh crore evasion detected in just 2024–25

One of the most alarming revelations is that ₹2.23 lakh crore worth of GST evasion was unearthed in the current fiscal year alone (2024–25), making it the highest ever annual detection since GST was implemented in July 2017.

The evasion was unearthed by the Central Goods and Services Tax (CGST) field officers, who have intensified investigations, audits, and real-time surveillance under guidance from the Directorate General of GST Intelligence (DGGI).

This signals a growing sophistication in fraud tactics on one hand, and a corresponding improvement in detection techniques on the other.

Break-up of five-year GST evasion

Here is a year-wise breakup of GST evasion detection:

• 2020–21: ₹1.19 lakh crore

• 2021–22: ₹1.32 lakh crore

• 2022–23: ₹1.57 lakh crore

• 2023–24: ₹0.77 lakh crore (impacted by COVID and system improvements)

• 2024–25 (so far): ₹2.23 lakh crore

This showcases a sharp upward trend, particularly in the current fiscal year, which could be a result of increased data integration, AI-based risk profiling, and a stronger field intelligence network.

₹1.79 lakh crore input tax credit fraud

A major component of the total evasion is the ₹1.79 lakh crore in fake input tax credit claims. Fraudsters generate fake invoices without actual supply of goods or services, allowing buyers to claim credit on tax never paid. These credits are often used to:

• Offset actual GST liabilities

• Obtain fraudulent refunds

• Launder money through layered transactions

The use of shell companies, multiple PAN-linked entities, and round-tripping of invoices are common tactics in these cases.

The GST Council and Ministry of Finance have labelled ITC fraud as one of the most dangerous forms of economic offence, as it not only affects revenue collection but also compromises genuine business competitiveness.

Measures to curb GST evasion

In response to the rising evasion figures, the government has implemented several technological and administrative measures to tighten GST compliance:

• Real-time invoice matching through e-invoicing portals

• Mandatory e-way bills for inter-state movement of goods

• Introduction of risk-based GST audits

• Deployment of AI-driven fraud detection algorithms

• Cross-verification with income tax and customs databases

• Blocking of ITC for entities flagged as suspicious by the DGGI

These reforms have led to a spike in detection numbers and have helped the government in recovering dues and penalising violators.

GST evasion trends across sectors

GST evasion and ITC fraud have been found across a wide range of sectors, including:

• Real estate and construction

• Iron and steel industry

• Textiles and garment manufacturing

• Pharmaceuticals

• Education and coaching institutes

• Information technology services

Each of these sectors have shown patterns of shell company creation, invoice layering, and cash transactions.

The government has stepped up sector-specific enforcement actions, including searches, seizures, arrests, and license cancellations.

Legal action and recoveries

Between 2020 and 2025:

• Over 6,700 persons were arrested in connection with GST frauds

• Around ₹2.1 lakh crore was recovered, though a significant amount remains under dispute or litigation

• Thousands of GST registrations were cancelled or suspended due to non-compliance or fictitious operations

• Cases have been registered under Section 132 of the CGST Act, which deals with offences like issuance of fake invoices and availing fraudulent ITC

Convictions are being pursued in high-value frauds through special economic offence courts, with penalties ranging from hefty fines to imprisonment of up to 5 years.

Need for compliance and awareness

The Finance Ministry has urged businesses, especially SMEs and traders, to prioritise accurate tax filing, invoice generation, and GST reconciliation to avoid falling into unintentional non-compliance or being exploited by fraudulent service providers.

Tax literacy campaigns, regular GSTN updates, and training for accountants and traders are being pushed by both central and state GST departments.

Tax professionals are also being asked to report suspicious client activities, and voluntary disclosures are being incentivised through reduced penalties.

Impact on GST collection and policy

While GST collections have been on a steady rise—crossing ₹1.7 lakh crore monthly averages in 2025—tax evasion remains a concern. Policymakers argue that plugging leakages could increase revenue by another ₹1.5 to ₹2 lakh crore annually.

This would empower the government to:

• Reduce tax rates across slabs

• Improve GST refund timelines

• Fund welfare and infrastructure programs without additional tax burden

Hence, compliance is not just a legal necessity—it is a civic responsibility, contributing directly to nation-building.

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