GST Evasion of ₹7.08 Trillion What It Means for Taxpayers
India has detected a staggering GST evasion of ₹7.08 trillion over the last five years, according to CBIC data. A major chunk—₹1.79 trillion—was due to fake input tax credit (ITC) claims. This crackdown sends a strong signal to businesses: non-compliance is no longer worth the risk.
Key Highlights: GST Evasion Data (FY 2019–20 to FY 2023–24)
| Component | Amount Detected |
|---|---|
| Total GST Evasion | ₹7.08 lakh crore |
| ITC Fraud (Fake Credit Claims) | ₹1.79 lakh crore |
| GST Evasion Detected in FY 2023–24 | ₹1.51 lakh crore |
| Tax Recovered (5-year total) | ₹3.1 lakh crore |
Source: Central Board of Indirect Taxes and Customs (CBIC), Parliamentary Reply, July 2025
Focus on Fake Input Tax Credit (ITC)
The biggest concern is the rising misuse of fake ITC through bogus invoices and non-existent suppliers. This violates Section 16 of the CGST Act, which mandates actual receipt of goods or services to claim ITC.
Common Fake ITC Triggers:
- Missing vendors or fake registrations
- Mismatched GSTR-3B and GSTR-2A/2B
- Circular trading without actual supply
- Shell companies issuing invoices for commission
Legal Provisions & Penalties for GST Evasion
| Provision | Penalty / Consequence |
|---|---|
| Sec 122(1)(ii) CGST Act | ₹10,000 or amount of tax evaded, whichever is higher |
| Sec 132(1)(c) CGST Act | Arrest for issuing fake invoices over ₹5 crore (non-bailable) |
| Sec 69 + Sec 132 | Power to arrest without warrant for fake ITC frauds |
| Rule 86A CGST Rules | Blocking of electronic credit ledger for suspected fraud |
How to Avoid GST Scrutiny: Expert Checklist
Before claiming ITC, ensure:
- Supplier is active and filed GSTR-1
- Invoice matches GSTR-2B auto-populated data
- Goods/services have been received
- Payment made within 180 days
Practical Tip:
Use the E-invoice system and GSTN supplier compliance rating (when available) to cross-check vendors before onboarding.
Government Measures to Curb GST Evasion
The government has tightened its compliance ecosystem:
- Mandatory E-invoicing (B2B for turnover > ₹5 crore)
- GSTR-2B-based ITC restriction under Rule 36(4)
- AI-driven risk assessment for fake ITC detection
- GSTN-Aadhaar authentication for new registrations
- Special Drive (2023–24) for fake registration cancellation
Why Small Businesses Must Take This Seriously
Even small firms fall into the GST radar if:
- They’re part of a fake invoice chain
- They deal with high-risk vendors
- Their filings are inconsistent or delayed
📌 Efiletax Pro Tip:
Always reconcile GSTR-2B monthly. A mismatch—even unintentional—can freeze your credit ledger or trigger notices.
Internal Link
➡️ Read our blog on Rule 86A: When and How GST ITC Gets Blocked
External Source
CBIC’s Official Data: https://pib.gov.in (replace with actual link)
FAQs
Q1. Can I get arrested for GST evasion through fake ITC?
Yes, under Section 132 of the CGST Act, ITC frauds above ₹5 crore are a cognizable offence with arrest provision.
Q2. How do I check if my vendor is compliant?
Use the GST portal to view GSTR-1 filing status and confirm if their GSTIN is active.
Q3. What is the safest way to claim ITC?
Claim only what appears in your GSTR-2B, backed by valid invoices and actual receipt of goods.
Summary
India detected ₹7.08 trillion GST evasion in 5 years, with ₹1.79 trillion from fake ITC claims. Businesses must stay vigilant—Section 132 allows arrest for fraud. Reconcile GSTR-2B, verify vendors, and stay updated. Use Efiletax to file compliant returns and avoid GST t