The number of and amount involved in fake input tax credit (ITC) cases detected by the government under the Goods and Services Tax (GST) have seen sharp spikes over the last two years, data shared by the finance ministry on Tuesday showed. This rise, according to experts, shows not only higher tax evasion but also enhanced enforcement by the government.
The government detected Rs 74,782 crore in fake ITC claims under GST in 2025-26 (April-March), up 27% from Rs 58,773 crore detected in FY25, Minister of State for Finance Pankaj Chaudhary told the Rajya Sabha on Tuesday. In FY24, the amount involved in such cases was just Rs 36,373 crore.
“These cases of ITC fraud have been detected across diverse sectors dealing in both goods and services, including iron & steel, textiles, plastics, paper products, plywood, cement, copper and various service sectors such as Works Contract Service, Manpower supply services, Real Estate Services etc.,” Chaudhary said in a written response to a question.
“The increase in detected ITC irregularities should not be viewed solely as a rise in tax evasion,” said Bipin Sapra, partner and indirect tax policy leader, EY India. “The higher numbers are also a reflection of the GST administration’s increasing use of technology, data analytics, and stronger enforcement against fake invoicing and fraudulent credit networks.”
According to Harpreet Singh, partner, indirect tax at Deloitte India, enhanced use of digital tools, e-invoicing data, and automated matching by GST Network (GSTN) is assisting the tax administration in real-time flagging of anomalies and outliers on ITC.
The number of cases has risen over three-fold between FY24 and FY26, government data showed. “Crucially, cases nearly doubled from 15,283 to 30,162 in FY26, while average detection per case declined—showing that authorities are identifying a wider and more granular universe of fraud,” said Manoj Mishra, partner and tax controversy management leader, Grant Thornton Bharat.
Mishra said the tax administration’s use of data analytics tools like Advanced Analytics in Indirect Taxes (ADVAIT) and Business Intelligence and Fraud Analytics (BIFA) helped identify anomalous credit flows, circular trading, and shell entities across networks.
The Central Board of Indirect Taxes rolled out Project ADVAIT in 2021 to assist officers in reporting, tax compliance, and detecting tax evasion using AI and big data.
The tax administration has also detected more fraud cases thanks to increased audits, investigations, and special drives, experts said.
The government held two special drives—between May 16, 2023 to August 14, 2023; and August 16, 2024 to October 30, 2024—on all India basis for coordinated action against fake registrations and fraudulent passing of ITC, Chaudhary said.
“With the expansion of economic activity and growth in GST collections, the volume of input tax credit flowing through the system has also increased, resulting in greater scrutiny and a higher value of discrepancies being identified,” Sapra of EY said. “The rise in detections is as much a reflection of improved compliance monitoring and enforcement as it is of continued attempts to misuse the ITC framework.”