Fake firms, real tax: the GST crackdown, and why genuine registrations now get rejected

On 10 May 2023 the editor of an online news portal filed a complaint at the Sector 20 police station in Noida. His PAN, he said, had been used to create two companies, one in Ludhiana and one in Solapur; a third application, in Delhi, had been rejected by GST authorities, PTI later reported. On 1 June police arrested eight people in Delhi's Madhu Vihar. "We discovered 2,660 such bogus companies were set up," said Laxmi Singh, police commissioner of Gautam Buddh Nagar. The Times of India reported that the gang allegedly held the PAN details of about 6.3 lakh people and sold firms for ₹80,000 to ₹90,000 each.

Before the Delhi High Court, the petitioner in Neha v. Union of India alleged that someone else had obtained a GST registration with the petitioner's PAN and Aadhaar numbers. The case was heard with a petition by Vikram Kaushal, and Outlook Money reported that transactions on the registrations had created GST liabilities in the petitioners' names. The respondents' written submission said biometric Aadhaar authentication "is carried out only if the system identifies the case as 'risky'". On 8 September 2026 Justices Anil Kshetarpal and Shail Jain, in an interim order, issued directions "to all the authorities across the country not to allow any GST Registration without biometric based AADHAR authentication henceforth".

For a founder applying now, the crackdown can mean a biometric check at a GST Suvidha Kendra (facilitation centre) and a query in Form GST REG-03 about the rent agreement. The Central Board of Indirect Taxes and Customs (CBIC) acknowledged in Instruction 03/2025-GST of 17 April 2025 that "avoidable clarifications" sought by officers were causing delay "as well as rejection of applications".

How big is the fake GST registration problem?

The two all-India drives found 21,791 non-existent GSTINs in 2023 and, by Taxscan's count, about 18,000 fake registrations in 2024. The Finance Ministry told the Rajya Sabha on 28 July 2026 that 5,699 registrations had been obtained with forged PAN or Aadhaar in FY24, 3,977 in FY25 and 1,517 in FY26. Credit fraud cases detected by central tax formations rose from 9,190 to 30,162 over the same years.

An earlier Rajya Sabha answer, quoted in the Delhi High Court's order, gave 2,800 for FY24 and 1,654 for FY25 against the same amounts. A Lok Sabha answer of 18 August 2025 counted 1,654 FY25 cases using stolen or forged PAN or Aadhaar and 3,977 firms identified; we have found nothing that says what the FY24 figure of 2,800 counted.

The first drive, under Instruction 01/2023-GST, ran from 16 May to 14 August 2023, and the second, under Instruction 02/2024-GST, from 16 August 2024 to 15 October, or 30 October in later answers. By 5 July 2023 officers had found 16,989 of 59,178 verified GSTINs non-existent, and Shashank Priya, a member of CBIC, said: "More refinement in the risk parameters for registration verification is required." We have found no third all-India drive as of October 2026.

How does a fake GST registration scheme work?

A fraudster obtains a GSTIN in another person's name, often without that person's knowledge, declares an address where no business runs, and issues invoices "without any underlying supply". Buyers use the invoices to claim input tax credit (a set-off for GST paid on purchases). Fake credit, an unnamed state GST official told the Times of India, lets a company "shrug off actual tax liability".

Instruction 01/2023-GST described "unscrupulous elements misusing the identity of other persons" and "forged electricity bills, property tax receipts, rent agreements, etc." offered as proof of the principal place of business. In a Gujarat case it recorded, registrations were taken on the PAN and Aadhaar of people "from economically weaker sections without their knowledge". They were paid "a nominal cash amount under guise of a government scheme", and their Aadhaar cards were linked to a dummy mobile number "by using their thumb impression".

The Noida gang allegedly bought personal data from employees of companies with large user databases, made rent agreements and electricity bills from formats found online, and generated e-way bills of ₹2 to 3 crore a month per firm, the Times of India reported. In November 2025 the Finance Ministry said the Delhi zonal unit of the Directorate General of GST Intelligence (DGGI) had found 229 dummy firms, controlled by a Delhi syndicate, that issued invoices without supply and involved about ₹645 crore of fraudulent credit. Officers seized 162 mobile phones, which the ministry said were probably used for OTPs, 44 digital signatures and more than 200 cheque books. In March 2026, the Times of India reported, central GST officers in Gurgaon traced a racket that allegedly advertised security guard vacancies on a job portal, collected KYC documents "under the pretext of employment verification" and applied for about 1,400 registrations.

What has the government changed to stop fake registrations?

Since 2020, amendments to the Central Goods and Services Tax (CGST) Act 2017 and the CGST Rules 2017 have tightened both entry to the register and the credit a buyer can take from an invoice.

A buyer can take credit only on invoices its supplier has reported, and GSTR-1 has had to be filed before GSTR-3B since 1 October 2022. A fake invoice therefore needs a registered supplier behind it, which in our reading is why the alleged Noida and Gurgaon rackets needed GSTINs in other people's names.

Biometric checks for flagged applicants started in Gujarat in December 2022 and spread to Puducherry and Andhra Pradesh in 2023 and to other States and Union Territories in 2024 and 2025. On 18 August 2025 the government told the Lok Sabha that biometric Aadhaar authentication had been "implemented nationwide" and that each application gets a system risk rating.

A minister's Rajya Sabha statement, annexed in the Delhi case, had said "biometric AADHAR based authentication has been made mandatory for the GST Registration". The bench observed that "the statement given by the minister on the floor of the house has not been fully implemented". The interim order gave liberty to file objections "qua any practical difficulty in its implementation" and listed the matter for 22 September 2026. We have found no later order and no CBIC or GSTN document implementing the direction as of October 2026.

What do GST officers check on a registration application now?

Officers check the applicant's identity against the PAN and Aadhaar, and the premises against the documents, public records and, for flagged applications, a site visit.

Under Rule 8(2)(a) the PAN is validated against the income tax database and verified through separate one-time passwords "sent to the mobile number and e-mail address" that are "linked to the Permanent Account Number"; the application form takes both from the same database. An applicant "identified on the common portal, based on data analysis and risk parameters" must also undergo biometric Aadhaar authentication, be photographed and have original documents verified at a GST Suvidha Kendra. The application is complete only after that.

Address proofs are "cross-verified from publicly available sources", the government told the Lok Sabha in August 2025, including land registry, electricity distribution company and municipal records. Where a site visit applies, the officer uploads a report in Form GST REG-30, with photographs including a "GPS enabled site photograph", at least five days before the 30-day approval deadline. If the premises is not found, the report records the "efforts made in respect of locating the said premises". Since Notification 38/2023-Central Tax, Rule 9 no longer says the visit must be made "in the presence of the said person".

Rule 9 gives the officer seven working days from submission to approve a complete application. The limit is 30 days, after physical verification under Rule 25, where the applicant has not undergone Aadhaar authentication, the application is flagged on risk parameters, or the officer thinks a visit necessary and an Assistant Commissioner approves. A query in Form GST REG-03 must issue within seven working days, or 30 days in those cases. The applicant replies in Form GST REG-04 within seven working days, a satisfied officer approves within seven working days of the reply, and an application not acted on in time is deemed approved under Rule 9(5).

Why are genuine GST registration applications rejected?

Rejections follow a query in Form GST REG-03, and CBIC found those queries were raised "mainly on account of proof of principal place of business", the constitution of the business and the identity of signatories and owners. Instruction 03/2025-GST now lists the grounds for a query: incomplete or illegible documents, an address that does not match its proof or is vague, an invalid address proof, and a cancelled or suspended GSTIN on the same PAN. Copy the address exactly as it appears on the uploaded bill or receipt, with floor, unit and pin code.

Rented premises need the rent or lease agreement and one ownership document of the landlord, such as a property tax receipt, municipal khata copy or electricity bill. If the agreement is not registered, the instruction adds "a copy of the identity proof of the lessor"; if there is no agreement, "an affidavit to that effect" with a document such as an electricity bill in the applicant's name "should suffice". With a registered agreement, officers must not ask for the landlord's PAN, Aadhaar or photograph.

A spouse's or relative's premises need "a consent letter in plain paper by the concerned owner of the premises", "a copy of the identity proof of the person granting consent" and one ownership document, so a parent's electricity bill on its own is not enough. Shared premises with an agreement need the agreement and an ownership document. To prove its constitution, a partnership firm needs only its deed, without an Udyam certificate, a shop and establishment certificate or a trade licence.

The instruction bars presumptive queries, for example that the residential address of the applicant, managing director or authorised signatory "is not in the same city or the State", or that the activity "can not be conducted from the particular premises". It also directs that "queries are not raised for minor deficiencies". Asking for an unlisted document needs the prior "approval of the concerned Deputy/Assistant Commissioner". A presumptive query, or a demand for an unlisted document without that approval, can be answered by citing the instruction.

If the PAN already carries a cancelled or suspended GSTIN, have the explanation ready. A business that cannot be found at its address on the day of a visit risks a report that the premises does not exist. Mizoram's Taxation Department said on 3 July 2026 that it was acting on applications with "unverifiable documents" or addresses with no commercial activity, and warned property owners and businesses not to share identity documents, addresses, mobile numbers or email IDs for others' registrations.

What can you do if a GST registration application is rejected?

You can appeal under Section 107 of the CGST Act within three months of the order's communication, extendable by one month, or file a fresh application that cures the stated reason. Rule 9(4) requires the officer to record that reason in writing in the rejection order, Form GST REG-05. In our experience a fresh application is the quicker route for a document problem. It is the only route for a wrong PAN, State, mobile number or email address, because an Explanation in Rule 9 lets a reply to a query correct any particular except those.

What happens if a GST registration is suspended or cancelled?

A suspended registration cannot obtain refunds under Section 54 of the CGST Act, and a registration found to belong to a non-existent business faces cancellation under Section 29, with its credit blocked under Rule 86A.

Under Rule 21A(2A), where a comparison of a taxpayer's returns with its own GSTR-1 or its suppliers' GSTR-1 shows "significant differences or anomalies", the registration is suspended. A notice in Form GST REG-31 gives the taxpayer 30 days to explain why the registration should not be cancelled. A taxpayer who has not furnished bank details under Rule 10A is suspended automatically and restored once they are filed, Finance Minister Nirmala Sitharaman told the Rajya Sabha in December 2023. The Lok Sabha was told in December 2025 that the system also suspends registrations after six months of non-filing.

Against non-existent taxpayers, the drive instructions also provide for recovery of the credit taken by their buyers and attachment under Section 83. Section 122(1A) penalises a person "who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix)" and at whose instance it was conducted. High Courts have differed on its reach, and SCC Times reported on 15 June 2026 that the Supreme Court had granted leave in the Mukesh Kumar Garg matter and stayed recovery on a 25 percent deposit; the appeal is pending as of October 2026.

A cancelled registration can be revived by applying for revocation under Section 30. Until 30 September 2023 the Act allowed "thirty days from the date of service of the cancellation order". Since 1 October 2023 the application is made "within such time ... as may be prescribed", which leaves the period to Rule 23 of the CGST Rules; check the current period on the day the order arrives.

How should a genuine applicant prepare a GST registration in 2026?

Prepare it as if it will go for a biometric check and a site visit; while the Delhi High Court's interim direction stands, the biometric step may apply whatever the risk score says. Pick the premises category in Instruction 03/2025-GST first and upload exactly the documents listed for it. Our step-by-step guide to GST registration covers the rest of the application.

File with the mobile number and email already linked to the applicant's PAN, since the OTPs go there. Opt for Aadhaar authentication in the application, because applicants who decline it must visit a Suvidha Kendra anyway. If the portal then asks for biometric authentication, go to one promptly with the original documents. Keep someone reachable at the address for 30 days after filing, and answer every point of any REG-03 notice in one reply within seven working days; a missing or partial reply leaves the officer free to reject under Rule 9(4). Within 30 days of the grant, or before the first GSTR-1 if earlier, add a bank account in the business's name, linked to its PAN and, for a proprietorship, to the proprietor's Aadhaar.

Frequently asked questions

What are the common reasons for GST registration rejection?

Rejections follow a query in Form GST REG-03, and CBIC found queries were mainly about proof of the principal place of business. Instruction 03/2025-GST allows queries for incomplete or illegible documents, a vague or mismatched address, an invalid address proof, or a cancelled or suspended GSTIN on the same PAN. No reply within seven working days, or a partial one, can lead to rejection under Rule 9(4).

Is biometric Aadhaar authentication compulsory for GST registration?

Rule 8(4A) of the CGST Rules requires it, with a photograph and document verification at a GST Suvidha Kendra, for applicants flagged on data analysis and risk parameters. On 8 September 2026 the Delhi High Court, in an interim order in Neha v. Union of India, directed all the authorities across the country not to allow any GST registration without biometric Aadhaar authentication. We have found no later order or implementing CBIC or GSTN document as of October 2026.

What happens during GST physical verification?

An officer visits the declared principal place of business and, at least five days before Rule 9's 30-day approval deadline, uploads a report in Form GST REG-30 with photographs, including a GPS-enabled site photograph. The report says whether the premises exists and, if not, what was done to find it. Since Notification 38/2023-Central Tax, Rule 9 no longer requires the visit to be made in the applicant's presence.

What documents are needed for GST registration of rented premises?

Instruction 03/2025-GST asks for the rent or lease agreement and one ownership document of the landlord, such as a property tax receipt, municipal khata copy or electricity bill. For an unregistered agreement, add the landlord's identity proof; with no agreement, an affidavit to that effect and a document such as an electricity bill in the applicant's name should suffice. With a registered agreement, officers are told not to ask for the landlord's PAN, Aadhaar or photograph.

How long does GST registration take in 2026?

Rule 9 of the CGST Rules allows seven working days for a complete application, or 30 days, after physical verification, where Aadhaar authentication is not done or a site visit is required. After a query in Form GST REG-03 the applicant has seven working days to reply and the officer seven more to approve. An application not acted on in time is deemed approved under Rule 9(5).

Can a rejected GST registration application be appealed?

Yes. A rejection in Form GST REG-05 must give its reasons in writing under Rule 9(4), and it can be appealed under Section 107 of the CGST Act within three months of its communication, extendable by one month. Where the reason is a missing or mismatched document, a fresh application that cures it is usually faster, and only a fresh application can change the PAN, State, mobile number or email declared in the application.

Sources

CBIC Instructions 01/2023-GST (4 May 2023), 02/2024-GST (12 August 2024) and 03/2025-GST (17 April 2025); CGST Act 2017, Sections 16(2)(aa), 29, 30, 54, 83, 107 and 122(1A); CGST Rules 2017, Rules 8, 9, 10A, 21A, 36(4) and 86A, with Notifications 92/2020, 94/2020, 39/2021, 40/2021, 26/2022, 27/2022, 28/2023, 31/2023, 38/2023, 54/2023, 12/2024 and 09/2025-Central Tax; Lok Sabha answers of 9 December 2024, 18 August 2025 and 15 December 2025; Rajya Sabha answers of 5 December 2023 and 28 July 2026; Delhi High Court order of 8 September 2026 in Neha v. Union of India (W.P.(C) 12210/2026), heard with Vikram Kaushal v. DGIT (Investigation) (W.P.(C) 6218/2026); Ministry of Finance statement of 13 November 2025; GSTN advisories reported in GST Council and ICSI newsletters of 2024 and 2025; TaxClue's note on Rule 9 of 5 September 2026; reports in the Times of India, PTI, The Tribune, Taxscan, Moneylife, India Today NE, Outlook Money and SCC Times between June 2023 and September 2026.