The Government of India has taken serious note of incidents of Goods and Services Tax (GST) evasion perpetrated through “sleeping modules”—inactive or dummy entities including pharmaceutical firms being misused as fronts for fake invoicing and fraudulent Input Tax Credit (ITC) claims. This was stated in the Rajya Sabha on December 09, 2025 by Shri Pankaj Chaudhary, Minister of State in the Ministry of Finance, in response to a question on the subject.
Rising Trend of Fake Invoicing Cases Addressed With Strong Enforcement
Presenting the national data on GST evasion cases detected by Central tax formations over recent years, the Minister informed that a significant escalation in fake invoicing attempts has been uncovered as part of continuous surveillance and enforcement action. Between FY 2022–23 and the current fiscal, the number of cases and estimated tax detection are as follows:
| Financial Year | No. of Cases Detected | Estimated Tax Detection (₹ crore) |
| 2022–23 | 7,231 | 24,140 |
| 2023–24 | 9,190 | 36,374 |
| 2024–25 | 15,283 | 58,772 |
| 2025–26 (up to Oct 2025) | 24,109 | 41,664 |
Specific enforcement action against GST evasion routed through pharmaceutical entities — which have been used as “sleeping modules” for fake invoicing in certain cases — yielded the following outcomes:
| Financial Year | No. of Cases | Detection (₹ crore) |
| 2022–23 | 3 | 31.71 |
| 2023–24 | 0 | 0 |
| 2024–25 | 2 | 5 |
| 2025–26 (up to Oct 2025) | 2 | 7.25 |
Multi-Layered Safeguards Introduced to Prevent and Detect GST Fraud
To prevent fraudulent ITC claims and strengthen accountability across the supply chain, the Government has deployed an integrated package of technology-driven compliance and enforcement measures. These include:
- Mandatory availability of invoices in GSTR-2B for ITC claims
- Blocking of GSTR-1 filing in absence of preceding GSTR-3B filing
- Sequential filing of GSTR-1 to prevent manipulation of reporting
- E-invoicing mandated for B2B transactions for businesses with turnover above ₹5 crore
Further tightening GST registration and identity verification norms, the Government has implemented:
- OTP-based PAN verification on linked mobile and email
- Risk-based biometric Aadhaar authentication for new registrations
- Mandatory physical verification for high-risk applicants even after Aadhaar authentication
- Bank account details required within 30 days of registration
System-based monitoring improvements include:
- Auto-suspension of GSTINs in cases of non-submission of valid bank account details within the prescribed time
- Suspension of registration for continuous non-filing of returns under Rule 21A of CGST Rules
- Geo-tagging of business premises for new registrants
- Automated recovery notices (DRC-01B and DRC-01C) for mismatches
In addition, the Invoice Management System (IMS), introduced in late 2024, enables recipient taxpayers to accept, reject or mark invoices as pending, enabling seamless cross-verification of supplier-reported invoices and promoting accurate ITC claims.
Stronger Penal Architecture to Deter Fraud
To make enforcement more stringent and deterrence-oriented, the Ministry of Finance has:
- Categorised fraudulent ITC availment without supply of goods/services as a cognizable and non-bailable offence
- Made beneficiaries of fraudulent transactions equally liable for penalty — including those retaining undue benefit from excess ITC or invoices issued without supply
Moreover, two nationwide special drives were conducted from:
- 16 May 2023 to 14 August 2023, and
- 16 August 2024 to 30 October 2024
These coordinated campaigns involved Central and State tax authorities and resulted in physical verification of business premises, identification of non-existent entities, and suspension/cancellation of fake GSTINs.
Government Reiterates Zero-Tolerance Approach
Reaffirming the commitment to maintaining the integrity of the GST ecosystem, the Government stated that action against fraudulent entities is a continuing priority and will be supported by:
- Advanced data analytics
- Real-time risk scoring
- Improved invoice traceability and compliance monitoring
The Ministry emphasised that the efforts aim not only to safeguard revenue but also to ensure a fair and competitive tax environment for all genuine businesses.
The reply can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2025/12/GST-THEFT-BY-SLEEPING-MODULES.pdf
