GST evasion of ₹2.2 lakh crore: What it means for Indian businesses
The focus keyphrase “GST evasion” has returned to the spotlight, with the Group of Ministers (GoM) identifying evasion worth ₹2.2 lakh crore across sectors. Ahead of the upcoming GST Council meeting, sector-specific enforcement strategies are being discussed to plug revenue leakages.
This blog breaks down what’s happening, how it impacts businesses, and what you can do to stay compliant.
What triggered this crackdown on GST evasion?
According to official sources, the GoM flagged evasion patterns using GSTN analytics, AI tools, and field enforcement reports. Key triggers include:
- Undervalued invoices and fake ITC claims
- Mismatch in GSTR-1 and GSTR-3B returns
- Sectoral anomalies in input-output ratio
- Rising number of fake registrations and mule PANs
The ₹2.2 lakh crore figure isn’t theoretical—it’s based on actual detection via GSTN’s deep data mining and CBIC enforcement drives.
Sectors under scanner for GST evasion
The GoM and CBIC have reportedly zeroed in on:
| Sector | Common Evasion Methods | Action Proposed |
|---|---|---|
| Iron & Steel | Bogus billing, fake ITC | E-invoice mandate expansion |
| Real Estate | Underreporting sales, cash dealings | Joint audit with RERA |
| Online Gaming & Betting | Tax classification issues | Special valuation rule |
| Edible Oil & FMCG | Bogus transport ITC, shell suppliers | Cross-checking e-way bills |
| Pharma & Healthcare | Distributor-level leakages | Targeted supply chain audits |
GoM’s intent is to move beyond blanket crackdowns and instead adopt sector-specific policy tweaks and compliance mandates.
Legal framework behind this GST evasion focus
The government’s crackdown aligns with powers under:
- Section 67–72 of the CGST Act, 2017 – Search, seizure, and arrest
- Rule 86B – Restriction on ITC usage for large taxpayers
- Section 16 – Eligibility conditions for availing ITC
- Section 122–132 – Penalties and prosecution for evasion
Recent court rulings, like in M/s Siddharth Enterprises v. State of Gujarat, have also reinforced the state’s right to deny credit based on fake supplier chains—even when the buyer claims good faith.
Compliance red flags your business should avoid
Here’s a practical checklist for any small business or consultant:
- Reconcile GSTR-1 with GSTR-3B every month
- Verify vendor GSTIN and e-invoice authenticity
- Avoid round-tripping or same-party circular trades
- Don’t overuse ITC beyond Rule 36(4) and Rule 86B limits
- Respond to GST DRC-01 notices promptly
Expert Tip:
Use the E-Invoice and GSTR-2B auto-matching feature in your ERP or accounting software. Most mismatches arise from manual filing or delayed uploads by suppliers.
What to expect from the upcoming GST Council meeting?
The 53rd GST Council meeting, expected soon, will likely address the GoM report with new decisions such as:
- Expanding e-invoicing to more B2B sectors below ₹5 crore turnover
- Setting up a centralised audit cell for high-risk taxpayers
- Possibly reworking valuation rules under Rule 31A for online gaming, betting, and casino platforms
- Enhancing the risk rating system for GSTINs
Stay tuned to our GST Council coverage blogs for the final decisions.
Summary
The GoM flagged ₹2.2 lakh crore in GST evasion, with sectors like steel, real estate, and gaming under scanner. Expect tighter e-invoicing norms and sector-specific crackdowns in the next GST Council meet. Stay compliant with reconciliations, e-invoice verifications, and vendor checks.
FAQs
Q1. Is GST evasion a criminal offence?
Yes. Under Section 132 of CGST Act, large-scale evasion can lead to arrest and prosecution.
Q2. Can a genuine buyer be penalised for fake supplier chains?
Unfortunately, yes. Courts have ruled that credit can be denied if the supplier is non-existent, even if the buyer acted in good faith.
Q3. How do I avoid being flagged for GST mismatch?
Match your GSTR-1 vs. 3B monthly. Also, check GSTR-2B for correct ITC before claiming.
Final Word
The ₹2.2 lakh crore GST evasion revelation isn’t just a headline—it’s a wake-up call. Sector-specific enforcement is coming, and the margin for error is shrinking.
Ensure your GST filings are clean, reconciled, and audit-ready.
Need help with monthly returns or vendor verification?
👉 File GST with Efiletax – India’s trusted tax platform.