GST Notices to Innocents: Can Govt’s Mandatory Biometric Aadhaar Authentication Curb Identity Theft?
Although the government has implemented steps such as multi-factor authentication for GST portal login and enhanced documentation requirements, these have not completely checked the flow of identity-based fraud
The increase in GST notices issued to non-businessmen or non-taxpayers has revealed a disturbing trend, the widespread abuse of personal identities for tax evasion. From daily wage workers to NRIs, unsuspecting citizens are being drawn into complicated court cases and financial tangles as a result of identity theft and loopholes in GST registration and compliance procedures. There...
The increase in GST notices issued to non-businessmen or non-taxpayers has revealed a disturbing trend, the widespread abuse of personal identities for tax evasion. From daily wage workers to NRIs, unsuspecting citizens are being drawn into complicated court cases and financial tangles as a result of identity theft and loopholes in GST registration and compliance procedures.
There situations emerged all over India where street vendors, daily wage laborers, and NRIs have been served GST notices for payment of crores in arrears-amounts they could never have owed.
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In Telangana, a worker was left stunned to receive a ₹22.86 lakh GST notice, only to find his PAN had been used fraudulently to register a business without his knowledge. In a similar vein, an NRI living in Dubai was issued a ₹2.84 crore GST notice for a company that he never conducted business with, thanks to a fake PAN card.
These are not one-off cases. The authorities have detected thousands of spurious GST registrations made through hacked PAN and Aadhaar information, with criminals taking advantage of loopholes in the system to establish shell firms, avail fictitious input tax credits, and launder funds. In FY 2024-25 alone, more than 25,000 spurious companies were found, which were party to frauds of over ₹1.95 lakh crore.
Investigations show that fraudsters get PAN and Aadhaar information through phishing, data breaches, or by taking advantage of sloppy document verification. They use these identities to register bogus businesses and create fake invoices. Even in some instances, slight mismatches in names between PAN and Aadhaar did not deter GST registration, pointing to loopholes in the system.
Another common method used by fraudsters is offering fake job opportunities to young people, luring them into submitting their personal details. These details are then misused, ultimately leading to the issuance of GST notices in the unsuspecting individuals’ names.
Although the government has implemented steps such as multi-factor authentication for GST portal login and enhanced documentation requirements, these have not completely checked the flow of identity-based fraud. Physical verification and Aadhaar authentication are now compulsory for "risky" applicants, but regular citizens are still at risk, particularly those who are not aware of digital compliance or lack frequent access to online monitoring tools.
Impact on Victims
The penalties suffered by victims of such identity abuse are dire and extensive. Most suffer economically as they attempt to pay for legal fees and establish their innocence, frequently while facing frozen assets and bank accounts.
In addition to the economic cost, victims also face reputational harm, which can result in loss of livelihood or future prospects. The psychological impact is also burdensome, with victims experiencing psychological trauma, anxiety, and frustration.
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To add insult to injury, victims are required to deal with complicated and daunting bureaucratic procedures making police complaints, interacting with tax officials, and seeking redressal activities that might appear daunting and out of reach to the ordinary citizen. Without proper support, most are left feeling helpless against a system they hardly comprehend.
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Is the Government Doing enough?
In spite of the magnitude of the issue, critics contend that the government reaction has been mainly reactive. Although authorities have arrested some scammers and shut down fraudulent input tax credits, there are still inadequate systemic reforms to stop identity theft and abuse. There is little indication of proactive engagement or assistance for victims, who are many and do not have the resources or information to protect themselves.
Experts caution that only if the government gives priority to strong identity checks, frequent cross-verifications of the registrations, and public awareness campaigns, the danger to harmless taxpayers will keep on escalating.
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The government has introduced biometric Aadhaar authentication for GST registration, a step that could help reduce the misuse of innocent individuals’ identities and strengthen safeguards against fraudulent registrations. However, the government should conduct serious searches related to identity misuse and threats.
By insisting on physical presence and biometric verification, the system also minimizes the risk of ghost companies and bogus GST registrations that earlier took advantage of loopholes in document-based verification procedures. This will discourage the scammers from doing identity theft and forming fake companies.
The GST Network (GSTN) employs data analytics as well as risk parameters to identify suspicious applications, leading to compulsory biometric verification of more risky cases. The new process provides better protection for innocent people from identity theft since unauthorized individuals cannot readily register a business in someone else's PAN or Aadhaar.
What Can Individuals Do?
- Regularly check the GST portal for unauthorized registrations using your PAN.
- Use the GSTIN search feature to verify if any business is wrongly linked to your details.
- Avoid sharing scanned copies of PAN or Aadhaar with unknown parties.
- Enable Aadhaar locking if not in frequent use.
- Monitor credit reports for unauthorized financial activity
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Recent Cases of PAN Misuse and Fake Tax Notices
A chain of appalling incidents has come to light where regular employees have been served with huge tax notices:
Juice Seller: Mohammad Raees from Aligarh, Uttar Pradesh, was served an income tax notice demanding ₹7.79 crore.
Egg Seller: Prince Suman from Damoh, Madhya Pradesh, received a GST notice for ₹6 crore, allegedly linked to transactions worth ₹50 crore.
Potter: Vishnu Kumar Prajapat from Bundi, Rajasthan, was issued an income tax notice for ₹10.61 crore.
Sanitation Worker at SBI: Karan Kumar Valmiki from Aligarh, Uttar Pradesh, who earns just ₹15,000 a month, was slapped with an income tax notice of ₹33.88 crore.
Daily Wage Laborer: Sabra, a daily wage laborer from Uttar Pradesh, received an income tax notice for Rs 4.88 crore, which she does not know of. Also, another dail wager from telangana was also issued with GST notices.
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