The Delhi High Court has expressed serious concern over the continuing misuse of innocent citizens’ PAN and Aadhaar particulars for obtaining fraudulent GST registrations, observing that such practices have allegedly remained rampant since the enforcement of the Central Goods and Services Tax Act, 2017.
The Bench of Justice Anil Khetarpal and Justice Shail Jain observed that the malpractice had been rampant since the enforcement of the CGST Act, 2017, and noted that nearly nine years had elapsed without the authorities effectively curbing the problem.
The proceedings arose against the backdrop of allegations that persons had fraudulently obtained GST registrations by using the PAN Card and Aadhaar Card numbers of individuals who had no connection with the businesses or GST registrations concerned.
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The Bench took note of the potentially serious consequences of such fraudulent registrations, particularly because a GST registration created in another person’s name can subsequently result in substantial tax liabilities being attributed to an innocent PAN holder.
The Court observed that, if the allegations were accepted, they indicated the existence of rampant fraudulent GST registrations in the names of innocent persons, followed by the creation of huge liabilities.
Recognising the seriousness of the issue, the Court had earlier requested Senior Advocate Tarun Gulati to assist it and suggest ways and means to curb misuse of PAN and Aadhaar particulars.
The Senior Counsel subsequently placed a set of suggestions before the Court, in addition to instructions and measures issued by the authorities from time to time.
These suggestions provide a potentially significant blueprint for strengthening the GST registration process.
10-Point Framework Proposed to Prevent Fraudulent GST Registrations
The suggestions placed before the Court contemplate substantially greater identity verification and risk monitoring at the GST registration stage.
1. Mandatory Facial Recognition With Aadhaar
The first suggestion is that facial recognition of the applicant against the Aadhaar database should be made mandatory for all GST registrations.
This would introduce an additional biometric layer of authentication beyond the submission of Aadhaar particulars.
2. Video-Based PAN and Aadhaar Verification
A second safeguard proposed is video-based verification.
Under the suggested mechanism, an applicant would upload a 20–30 second video showing their face along with the original PAN and Aadhaar cards before the camera. The applicant would hold each document before the camera for a specified period.
The applicant would also be required to read aloud a system-generated prompt containing the applicant’s name or other relevant particulars together with a unique code generated by the GST common portal.
The proposal is designed to make it considerably more difficult for another person to use scanned copies or stolen details of an innocent PAN/Aadhaar holder.
3. Preservation of IP Address and Device Location
The suggested framework also calls for the IP address and device location used during the GST registration application process to be recorded and preserved by the GST common portal and the jurisdictional authority.
Such information could subsequently become important evidence where the registered taxpayer disputes having applied for or obtained a GST registration.
This proposal has potentially significant implications for future investigations because it would preserve technical information concerning the origin of a disputed registration application.
4. Physical Verification of Principal Place of Business
Another major suggestion concerns verification of the principal place of business (PPOB).
The proposal contemplates mandatory physical verification before grant of registration, rather than restricting such verification only to registrations identified as high-risk by the existing risk-analysis mechanism.
Alternatively, random physical inspections could be conducted on selected GST registrations on a bi-annual basis, using a risk-evaluation system.
This could address a common vulnerability in fraudulent registrations—registration of businesses at locations where the purported taxpayer does not actually operate.
5. Real-Time Information Sharing With the Income Tax Department
The suggested framework further proposes real-time data sharing between GST authorities and the Income Tax Department.
Under the proposal, when a PAN is used for GST registration, the PAN holder could receive a real-time message and email informing them that their PAN has been used.
The system could additionally validate and cross-check the information with Form 26AS/Form 16B generated for the taxpayer.
Such an alert mechanism could give genuine PAN holders an early opportunity to identify fraudulent registrations before tax demands or other proceedings arise.
6. Flagging Sudden and Significant Turnover
The suggestions also contemplate automated identification of suspicious financial activity.
A sudden and significant increase in turnover could trigger a system-generated flag and place the registration in a potentially suspected category.
This represents a shift towards continuous post-registration monitoring rather than relying exclusively on verification at the time of GSTIN creation.
7. Aadhaar Holder Confirmation
Another proposed safeguard is real-time confirmation from the Aadhaar holder that they actually know about the business and the principal place of business being registered using their Aadhaar particulars.
This mechanism would directly address cases in which Aadhaar information is allegedly used without the knowledge of the person to whom it belongs.
8. DigiLocker Alerts
The proposal further suggests sending a notification through DigiLocker, where available, informing the individual that their PAN/Aadhaar number has been used for GST registration and seeking consent or confirmation.
The proposal therefore envisages multiple communication channels instead of depending exclusively on the GST portal.
9. New DGARM Risk Parameters
The Directorate General of Analytics and Risk Management (DGARM) could create specific risk parameters for:
- PAN-Aadhaar mismatch; and
- first-time use of PAN/Aadhaar for GST registration.
Such parameters could help the authorities identify registrations requiring enhanced scrutiny.
10. Identification of Persons Connected With the Business
Finally, the proposed framework contemplates requiring an applicant to nominate one or more identifiable persons, such as business associates, employees, partners or family members, who could corroborate:
- the applicant’s identity; and
- the existence of the proposed business.
This could create an additional human-verification layer where questions arise regarding the authenticity of a newly created GST registration.
Court Criticises Failure to Curb the Problem Over Nearly Nine Years
One of the strongest observations in the order concerns the length of time for which the problem has allegedly persisted.
The Court recorded that the Respondents did not dispute the existence of the problem of fraudulent GST registrations through misuse of PAN and Aadhaar particulars of innocent citizens.
Importantly, the Court highlighted two categories of harm:
- innocent citizens are affected despite having no connection with the fraudulent GST registrations, and
- the fraudulent activity can cause huge loss to the Government.
Thus, the issue is not merely a dispute between a taxpayer and the GST Department. It has wider implications involving identity theft, revenue leakage, fraudulent invoicing and the creation of tax liabilities against persons who may have no knowledge of the underlying business.
The Court had earlier issued notice to the Commissioner of Delhi Police, recognising the potential criminal dimension of fraudulent GST registrations.
For the September 1 hearing, the Commissioner deputed a Sub-Inspector, Rajesh Kumar, to assist the Court. However, the Bench expressed concern that, when questioned, the officer was not aware of the problem or issue involved in the cases.
The observation underscores the Court’s concern that effective action may require coordination between tax authorities and law-enforcement agencies, rather than treating fraudulent GST registration solely as a tax-administration issue.
After considering the suggestions and the response of the authorities, the Court granted what it expressly described as a “last opportunity” to the concerned authorities.
The Commissioner, CGST; Commissioner, DGST; and Commissioner of Delhi Police have been called upon to find an effective solution to the problem.
The Court made it clear that, if an effective solution is not found, it may have no option but to pass appropriate and effective orders in the matter.
The matters have been directed to be listed on September 8, 2026, in the Supplementary List.
The Delhi High Court proceedings could have implications beyond the individual petitioners because they place the spotlight on the architecture of GST registration verification itself.
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