Tax Evasion a National Crime CM Calls for Stern Action Against Fake Firms
Chief Ministers across India are now taking a bold stance: tax evasion is not just a financial fraud—it’s a national crime.
Recently, a Chief Minister strongly urged the Centre and enforcement agencies to intensify action against fake firms that manipulate GST and evade taxes. The statement comes amid rising cases of fraudulent Input Tax Credit (ITC) claims that hurt both revenue and compliance trust.
Why Is Tax Evasion Being Treated as a National Crime?
- Loss to the exchequer: Fraudulent ITC claims bleed thousands of crores from government revenue.
- Public burden: Honest taxpayers are forced to shoulder the burden of evasion.
- Systemic abuse: Fake firms manipulate registration loopholes and invoice chains to launder money or avoid taxes.
- Economic threat: Large-scale evasion weakens the economy and public trust in digital tax systems like GSTN.
Recent Enforcement Trends: Action Against Fake GST Firms
The CM’s statement aligns with nationwide crackdowns led by the GST Intelligence units (DGGI) and Central GST zones:
| Period | No. of Fake Registrations Detected | Estimated Tax Evasion (₹) |
|---|---|---|
| Oct 2023 – Mar 2024 | Over 27,000 registrations flagged | ₹31,000+ crore |
| Apr 2024 – May 2025 | Ongoing probes in >15 states | ₹12,000+ crore |
📌 Source: CBIC reports, DGGI updates (2024–25)
Government Measures to Curb Tax Evasion
Here’s how the government is tightening controls:
- Mandatory Aadhaar Authentication for GST registration.
- Risk Profiling Algorithms integrated with GSTN portal.
- Real-time PAN-Aadhaar Linking & Verification.
- Scrutiny of Suspicious Input Credit Chains using AI and data mining.
- Amendments to CGST Rules, such as Rule 10A and Rule 21A, to suspend fake/fraudulent registrations.
CM’s Key Suggestions for Stronger Action
The Chief Minister’s proposal includes:
- Strict prosecution of offenders under Sections 132 and 122 of CGST Act.
- State-level task forces to track and penalise repeat offenders.
- Cross-verification of vendor databases using E-invoicing and ICEGATE.
Legal Angle: What Does the CGST Act Say?
- Section 132: Allows arrest for deliberate evasion > ₹5 crore.
- Section 122: Imposes penalties up to 100% of tax evaded.
- Rule 21: Cancellation of registration if obtained via fraud.
- Recent Case Law: Girdhar Trading Co. vs. Union of India (2024) upheld detention of goods linked to fake ITC claimants.
Expert View: How Can Honest Taxpayers Stay Safe?
“Businesses must validate vendor GSTINs, file returns on time, and avoid shell deals. Even unintentional credit from a fake firm can attract reversal with penalty,” says CA Prateek Goel, Indore.
FAQs:
Q1. Is claiming ITC from a fake firm punishable?
Yes. Even unintentional claims can lead to reversal and penalties.
Q2. What is Rule 21A?
It allows temporary suspension of GSTIN if fraud is suspected, pending investigation.
Q3. What can a business do if their vendor is flagged as fake?
Stop transactions immediately. Report the vendor to your jurisdictional officer and consult a CA.
Summary
Crackdowns on fake GST firms are intensifying with stricter rules, legal action under the CGST Act, and Aadhaar-based checks to protect revenue and honest taxpayers.
Final Thoughts
The CM’s call reinforces that tax evasion is not a victimless crime. At Efiletax, we help you stay compliant, reduce risks, and navigate GST challenges with expert guidance.