The Delhi High Court has directed Goods and Services Tax (GST) authorities across the country not to permit any new GST registration unless the applicant undergoes biometric-based Aadhaar authentication, taking serious note of the continued misuse of stolen or frozen Permanent Account Number (PAN) and Aadhaar details to create fraudulent registrations.

 

A Division Bench of Justices Anil Khetarpal and Shail Jain issued the direction while hearing petitions alleging that GST registrations had been fraudulently obtained in the names of innocent individuals by using their PAN and Aadhaar particulars. The court said the practice was causing both harassment to citizens who had no connection with the businesses and substantial revenue loss to the government.

  

The court noted that the authorities had not pointed out any practical difficulty in making biometric Aadhaar authentication mandatory for GST registration. It consequently directed all authorities across the country to ensure that no GST registration is allowed without such authentication. The authorities have been given liberty to place objections before the court if they face practical difficulties in implementing the direction.

 

The Bench also asked the authorities to examine a set of measures suggested by Senior Advocate Tarun Gulati, who had been requested to assist the court on ways to curb fraudulent GST registrations.

 

Among the proposed safeguards are mandatory facial recognition of applicants against the Aadhaar database and video-based verification of PAN and Aadhaar. Under the proposed video verification mechanism, an applicant would have to upload a short video showing their face along with the original PAN and Aadhaar cards and respond to a system-generated prompt containing their details and a unique code.

 

The suggestions also include preserving the IP address and device location used for filing GST registration applications, mandatory physical verification of the proposed principal place of business, and real-time information sharing between the GST and Income Tax departments.

 

Another proposed safeguard is that PAN holders should receive an immediate message and email whenever their PAN is used for GST registration. Authorities have also been asked to explore cross-checking GST data with tax records, including Form 26AS.

 

The court was informed that the problem of fraudulent GST registrations using the identity particulars of innocent persons had persisted since the enforcement of the Central Goods and Services Tax Act, 2017. The Bench observed that nearly nine years had passed, yet the respondents had failed to effectively curb the malpractice.

 

The scale of the problem was highlighted through figures placed before the court.

 

According to information disclosed by the Minister of State for Finance in the Rajya Sabha, 2,800 fraudulent GST registrations involving stolen or frozen PAN/Aadhaar details were detected in 2023-24, with tax evasion of Rs 15,085 crore. In 2024-25, another 1,654 fraudulent registrations were detected, involving tax evasion of Rs 13,109 crore.

 

The Bench observed that despite the government stating that biometric Aadhaar authentication had been made mandatory, the measure appeared not to have been fully implemented, with fraudulent registrations continuing to be obtained using stolen or frozen identity details.

 

The court had earlier noted that the issue appeared to be widespread and had warned that fraudulent registrations could result in large tax liabilities being created against persons who had nothing to do with the businesses concerned. It had also sought assistance from the Delhi Police and directed the Commissioner of Delhi Police to deputise an officer in the matter.

 

The Bench has listed the matter for further consideration on September 22.

 

Reacting to the order, Ikesh Nagpal, Lead- Indirect Tax, AKM Global, a tax and consulting firm, said, “The Court’s direction effectively puts identity verification at the front and centre of GST registration, which is important when stolen or misused PAN and Aadhaar details can leave completely innocent persons facing the consequences of fraudulent registrations.”

 

At the same time, he said, the suggestions around real-time alerts, digital footprints and targeted verification can add meaningful layers of protection.

 

“The objective should be to strike the right balance by keeping registration process frictionless for genuine businesses, but far less vulnerable to misuse of an innocent person’s PAN or Aadhaar,” he added.