The Delhi High Court has expressed serious concern over the continued misuse of innocent citizens’ PAN and Aadhaar details for obtaining fraudulent GST registrations. The Court observed that despite almost nine years having passed since the implementation of the Central Goods and Services Tax (CGST) Act, 2017, the authorities have failed to effectively prevent such fraudulent registrations.
The observations were made by a Division Bench comprising Justice Anil Kshetarpal and Justice Shail Jain while hearing petitions in which individuals claimed that GST registrations had been obtained in their names without their knowledge or involvement.
Innocent PAN and Aadhaar Holders Facing GST Liabilities
The Court noted that this was the second matter before it involving allegations that another person had fraudulently obtained a GST registration by using the petitioner’s PAN and Aadhaar details.
The issue assumes considerable importance because a fraudulent GST registration can potentially result in substantial tax liabilities, notices, penalties and even allegations of tax evasion being linked to an individual who has no actual connection with the business.
In an earlier order dated August 21, the Court had observed that, if such allegations were ultimately found to be correct, they indicated a rampant misuse of PAN and Aadhaar for fraudulent GST registrations, potentially causing significant hardship to innocent citizens and substantial revenue loss to the Government.
Court Seeks Practical Measures to Stop GST Registration Fraud
Recognising the seriousness of the issue, the Delhi High Court had sought assistance from senior advocate Tarun Gulati regarding possible technological and administrative safeguards that could reduce the risk of identity misuse during GST registration.
Several suggestions were subsequently placed before the Court.
One important proposal was to make facial recognition linked with the Aadhaar database mandatory for persons applying for GST registration. Such a mechanism could help authorities determine whether the person applying for registration is actually the Aadhaar holder whose identity is being used.
Another proposed safeguard was video-based identity verification. Under this mechanism, an applicant could be required to upload a short video, approximately 20–30 seconds long, showing their face, displaying their original PAN and Aadhaar cards and reading a system-generated statement containing their personal details and a unique verification code.
Tracking IP Address and Device Details
The suggestions before the Court also included stronger digital monitoring of GST registration applications.
Authorities could record and preserve the IP address and device location from which an application for GST registration is submitted. Such information could potentially assist investigators in identifying suspicious applications and tracing persons involved in identity misuse.
Physical verification was another proposed safeguard. The authorities could make physical verification of the proposed principal place of business mandatory before granting registration.
Alternatively, the authorities could conduct random physical inspections of registered businesses periodically, including on a bi-annual basis, to identify registrations that may have been obtained through fraudulent means.
Alerts to PAN and Aadhaar Holders
Another significant suggestion was to establish a system under which the genuine PAN holder would receive an instant alert whenever their PAN was used for GST registration.
Similarly, Aadhaar holders could receive real-time confirmation requests asking them to verify whether they had actually authorised the GST registration and whether the stated principal place of business belonged to the business concerned.
Such alerts could enable innocent individuals to immediately report unauthorised use of their identity documents before fraudulent transactions accumulate.
Data Sharing and Risk-Based Monitoring
The proposed measures also contemplated greater coordination between tax authorities.
Real-time sharing of relevant GST registration information with the Income Tax Department could help identify inconsistencies between GST and income-tax records.
The Court was also apprised of suggestions for monitoring unusual business activity, including sudden and significant increases in reported turnover.
The Directorate General of Analytics and Risk Management (DGARM) could potentially develop specific risk parameters to identify suspicious cases, including PAN-Aadhaar mismatches and the first-time use of a PAN or Aadhaar for GST registration.
Court Criticises Authorities for Lack of Effective Action
The Delhi High Court noted that the authorities did not dispute the existence of the problem involving fraudulent GST registrations using the identity details of innocent persons.
The Court expressed concern that nearly nine years after the CGST Act came into force, effective measures had still not been implemented to completely address the issue.
The Court also observed that such fraudulent registrations have a dual impact. While innocent citizens may face tax demands and legal complications for businesses with which they have no connection, fraudulent registrations can simultaneously facilitate tax evasion and revenue leakage for the Government.
The Court further noted that the Commissioner of Delhi Police had deputed a Sub-Inspector to assist in the proceedings pursuant to its earlier directions. However, the Court expressed concern that the officer appeared unaware of the nature of the problem when questioned.
Authorities Given a Final Opportunity
In view of the circumstances, the Delhi High Court granted the **Commissioner of CGST, Commissioner of DGST and Commissioner of Delhi Police a final opportunity to work out an effective mechanism to prevent fraudulent GST registrations based on stolen or misused identity details.
The Court made it clear that failure to develop an effective solution could compel it to pass appropriate and effective directions.
The matter has been listed for further hearing on September 8, 2026.
Case Details
Case Number: W.P.(C) 12210/2026
Court: Delhi High Court
Issue: Fraudulent GST registration using PAN and Aadhaar details of an innocent citizen
Key Takeaway
The Delhi High Court’s observations highlight the urgent need for stronger identity verification, technological safeguards, risk-based scrutiny and inter-departmental coordination in the GST registration process. If implemented effectively, measures such as facial recognition, video verification, PAN/Aadhaar alerts, digital footprints and physical verification could significantly reduce identity-based GST fraud and protect genuine citizens from wrongful tax liabilities.