Delhi HC cracks down on fake GST registrations, orders biometric Aadhaar checks nationwide
Delhi HC orders biometric Aadhaar authentication for GST registrations after fake accounts linked to crores in tax evasion.
by Subhrajit Roy · Zee NewsThe Delhi High Court has ordered authorities across India not to allow any GST registration without biometric-based Aadhaar authentication, stepping in after cases involving stolen or frozen PAN and Aadhaar details. The court said fake registrations have continued despite government measures, exposing innocent people to tax liabilities while causing major revenue losses to the government.
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Delhi HC flags fake GST registrations using PAN and Aadhaar
A bench of Justices Anil Khetarpal and Shail Jain issued the direction while hearing two petitions involving alleged fraudulent GST registrations created with the PAN and Aadhaar details of people who had no connection with the businesses.
The court said the problem had been "rampant" since the Central Goods and Services Tax Act came into force in 2017. Nearly nine years later, it said, authorities had still not been able to stop the misuse.
The bench said such registrations can leave innocent people facing demands and other action for businesses they never operated. The fraud also causes a "huge loss to the government".
Fake GST registrations linked to Rs 28,194 crore tax evasion
The court referred to figures disclosed by the Minister of State for Finance in the Rajya Sabha. The data showed the scale of fraudulent registrations involving stolen or frozen PAN and Aadhaar details.
- 2023-24: 2,800 fraudulent GST registrations involving Rs 15,085 crore in tax evasion.
- 2024-25: 1,654 fraudulent GST registrations involving Rs 13,109 crore in tax evasion.
Together, the two years account for 4,454 detected registrations and Rs 28,194 crore in reported tax evasion.
Why Delhi High Court ordered biometric Aadhaar checks
The High Court was told that biometric Aadhaar authentication was currently being used when the GST registration system classified an application as risky based on data analysis and other parameters.
The bench, however, found that an earlier move towards mandatory biometric Aadhaar authentication had not been fully carried out.
"It appears that despite passage of more than one year, the statement given by the minister on the floor of the house has not been fully implemented, resulting in continuous fake GST Registration obtained using stolen or frozen PAN/AADHAR details," the bench said.
The court said authorities needed to "rise to the situation" because the problem was hurting both the public and government revenue.
"Learned counsel representing the respondents (authorities) have failed to draw the attention of the court to any difficulty in mandating the biometric-based Aadhaar authentication of the GST Registration," it observed.
"Since, for the time being, directions are issued to all the authorities across the country not to allow any GST registration without biometric-based Aadhaar authentication henceforth," the High Court ordered.
The authorities have been allowed to raise objections if they face practical problems in implementing the order.
Facial recognition and video verification among proposals
The court also asked authorities to examine suggestions submitted by senior advocate Tarun Gulati, who was asked to assist it in finding ways to stop fraudulent GST registrations.
The proposals include facial recognition against the Aadhaar database and video verification in which an applicant would show their face and original PAN and Aadhaar cards.
Other suggestions include recording the IP address and device location used for an application, physical verification of the main place of business and real-time sharing of registration information with the Income Tax Department.
A PAN holder could also receive an immediate message and email when their PAN is used for a GST registration. Other proposals include DigiLocker alerts and checks when a business reports a sudden jump in turnover.
The court had raised concerns about the problem on August 21 after encountering another case in which a person claimed someone else had obtained a GST registration using their PAN and Aadhaar details.
The matter will next come before the High Court on September 22.
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