India is confronting an unprecedented surge in GST fraud, with new government data revealing over 55,000 cases of fake invoicing and input tax credit (ITC) theft detected since FY23 — involving ₹1.61 lakh crore in suspicious transactions. Officials warn that fraud networks have evolved into a parallel industry, built on revived shell entities known as “sleeping modules.”
These dormant companies are being reactivated to issue bogus invoices without any actual supply of goods, enabling downstream buyers to illegally claim ITC. The scale of the problem has escalated sharply:
- FY23: 7,231 cases | ₹24,140 crore
- FY24: 9,190 cases | ₹36,374 crore
- FY25: 15,283 cases | ₹58,772 crore
- FY26 (Apr–Oct): 24,109 cases | ₹41,664 crore
A worrying trend is the misuse of dormant pharmaceutical firms, which come with extensive licences and documentation, making fake supply chains harder to trace. Although cases are few, officials say these frauds can generate invoices worth hundreds of crores without any physical operation.
To counter the explosion of shell networks, the government has introduced a series of guardrails: stricter invoice matching, mandatory sequential return filing, PAN-linked verification, Aadhaar-based biometric checks, physical site inspections, geo-tagging, and expanded e-invoicing norms. The recently launched Invoice Management System (IMS) further allows buyers to accept or reject invoices in real time, curbing “ghost entries.”
Yet, enforcement struggles to keep pace. Syndicates now operate faster than detection mechanisms, exploiting stolen PANs, fake addresses, and fragmented transactions across multiple shell entities.
As revenue pressures rise ahead of the Union Budget, experts urge deeper data integration across GST, corporate affairs, pharma regulators, and banks. For now, the accelerating fraud wave underscores a hard truth: India’s GST regime remains under siege from its most adaptive threat — the fake invoice economy.
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