New Delhi, Sep 10 (IANS) The Delhi High Court has directed authorities across the country not to allow any GST registration without biometric-based Aadhaar authentication, observing that fraudulent registrations using stolen or frozen PAN and Aadhaar details were continuing despite measures announced by the government.
A bench of Justices Anil Khetarpal and Shail Jain passed the directions while hearing two petitions concerning allegations of fraudulent GST registrations obtained by using the PAN and Aadhaar details of innocent persons.
In its order, the High Court observed that the problem had been “rampant” since the enforcement of the CGST Act, 2017 and that nearly nine years had elapsed, yet the authorities had failed to curb the malpractice.
The Justice Khetarpal-led Bench observed that such fraudulent registrations not only cause harassment to citizens who have nothing to do with the businesses concerned, but also result in a “huge loss to the government”.
During the hearing, the High Court was informed that biometric-based Aadhaar authentication was being carried out only when the GST registration system identified a case as “risky” on the basis of various parameters and data analytics.
The order referred to data disclosed by the Minister of State for Finance in the Rajya Sabha, according to which 2,800 fraudulent GST registrations using stolen or frozen PAN/Aadhaar details were detected in 2023-24, involving tax evasion of Rs 15,085 crore. In 2024-25, 1,654 fraudulent GST registrations were detected, involving tax evasion of Rs 13,109 crore.
The High Court recorded that although biometric Aadhaar-based authentication had been stated to have been made mandatory for GST registration, “despite passage of more than one year”, the measure had not been fully implemented.
“It appears that despite passage of more than one year, the statement given by the minister on the floor of the house has not been fully implemented, resulting in continuous fake GST Registration obtained using stolen or frozen PAN/AADHAR details,” the bench said.
It added that the competent authorities needed to “rise to the situation” as the issue was causing both revenue loss to the government and harassment to innocent citizens.
“Learned counsel representing the respondents (authorities) have failed to draw the attention of the court to any difficulty in mandating the biometric-based Aadhaar authentication of the GST Registration,” it observed.
“Since, for the time being, directions are issued to all the authorities across the country not to allow any GST Registration without biometric-based Aadhaar authentication henceforth,” the High Court ordered.
However, it granted liberty to the authorities to file objections regarding any practical difficulty in implementing the direction.
The bench also directed the authorities to examine a set of suggestions submitted by senior advocate Tarun Gulati, who had been requested to assist the court in finding ways to curb fraudulent GST registrations.
Among the suggestions are making facial recognition against the Aadhaar database mandatory for all GST registrations and introducing video-based verification requiring applicants to show their face along with the original PAN and Aadhaar cards.
The suggestions also include recording and preserving the IP address and device location used while filing a GST application, mandatory physical verification of the proposed principal place of business, and real-time sharing of registration data with the Income Tax Department.
Another proposal is to send a real-time message and email to the PAN holder informing them that their PAN has been used for GST registration, besides cross-checking the information with tax records.
The suggestions further call for flagging sudden and significant increases in turnover, real-time confirmation from the Aadhaar holder about knowledge of the business and principal place of business, and alerts through DigiLocker where available.
The senior counsel also suggested that the Directorate General of Analytics and Risk Management (DGARM) create specific risk parameters for PAN-Aadhaar mismatch and the “first time use of PAN/Aadhaar for GST”.
On August 21, the Justice Khetarpal-led Bench noted that this was the second case before it where a petitioner alleged fraudulent GST registration by another person using their PAN and Aadhaar details.
“If the allegations of the Petitioner are to be accepted, there are rampant fraudulent GST Registration(s) in the name of innocent persons and pursuant to which huge liability is created thereafter,” it had observed. It had subsequently granted the respondents a “last opportunity” to find an effective solution to the problem, warning that failing this, it would be left with “no choice but to pass appropriate and effective orders”.
The matter has now been listed for further consideration on September 22.
–IANS
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