Court Acts After Finding “Rampant” Misuse of Stolen PAN and Aadhaar Details to Obtain Fake GST Numbers
In a significant intervention into India’s tax administration system, a Division Bench of the Delhi High Court comprising Justice Anil Kshetarpal and Justice Shail Jain has directed authorities across the country to stop granting any GST registration without mandatory biometric-based Aadhaar authentication. The order, passed on 8 September 2026, arose out of a batch of writ petitions in which ordinary citizens complained that their identity documents had been fraudulently used by unknown persons to obtain GST registrations in their names.
The Petitions: Identity Theft for Tax Fraud
The lead matter, Neha v. Union of India & Ors. (W.P.(C) 12210/2026), was heard along with a connected petition, Vikram Kaushal v. Director General of Income Tax (Investigation) & Ors. (W.P.(C) 6218/2026). Both petitioners made a similar allegation: that someone had used their PAN card and Aadhaar card numbers, without their knowledge or consent, to register fraudulent entities under the Goods and Services Tax (GST) regime.
The Court noted that this was not an isolated grievance. As the Bench observed while first taking up the matter on 21 August 2026, if the petitioners’ allegations were accepted, they pointed to a much larger problem — “rampant” fraudulent GST registrations being created in the names of innocent citizens, each carrying with it the risk of enormous, wrongly attributed tax liability.
Senior Counsel Roped in to Assist the Court
Recognising the scale of the issue, the Court took the unusual step of requesting Mr. Tarun Gulati, Senior Advocate, who ordinarily appears for assessees (taxpayers) before the High Court, to assist as amicus curiae and propose solutions. Notice was also issued to the Commissioner of Delhi Police, given the criminal dimension of identity theft underlying the fraud.
Mr. Gulati subsequently placed before the Court a detailed set of proposed safeguards, going beyond the measures currently followed by tax authorities, aimed at preventing misuse of identity documents during the GST registration process. His suggestions included:
- Mandatory facial recognition of every applicant against the Aadhaar database at the time of registration — not just in cases flagged as “risky.”
- Video-based verification, requiring applicants to upload a short video (20–30 seconds) showing their face along with the original PAN and Aadhaar cards, and reading aloud a system-generated code, similar to the process already used for Digital Signature Certificate (DSC) registration by agencies such as eMudhra.
- Recording and preservation of the IP address and device location used to file each application, both by the GST common portal and the sanctioning authority, so that this data is available if a dispute later arises over who actually filed the application.
- Mandatory physical verification of the proposed principal place of business before registration is granted — rather than restricting such verification to cases the existing risk-analytics engine flags as high-risk. As an alternative, the Court noted the suggestion of conducting random physical inspections of registered businesses on a bi-annual basis.
- Real-time data sharing with the Income Tax Department, including an automatic SMS/email alert to the PAN holder whenever their PAN is used for a GST registration, cross-checked against Form 26AS/Form 16B records.
- Automatic flagging of registrations showing a sudden, significant spike in turnover as “potentially suspected.”
- Real-time confirmation from the Aadhaar holder that they have actual knowledge of the business or principal place of business being registered under their Aadhaar.
- Alerts through DigiLocker, where available, informing the individual that their PAN/Aadhaar has been used for a GST registration and seeking their consent-confirmation.
- Use of the Directorate General of Analytics and Risk Management (DGARM) to create a dedicated risk parameter for PAN–Aadhaar mismatches and “first-time use” of a PAN/Aadhaar for GST purposes.
- Requiring applicants to nominate identifiable third parties — such as business associates, employees, partners, or family members — who can corroborate both the applicant’s identity and the genuine existence of the proposed business.
Government’s Own Data Reveals Scale of the Problem
What appears to have weighed heavily with the Bench was data placed on record by the Union Government itself. An affidavit annexed to the written submissions disclosed that the Minister of State in the Ministry of Finance had informed the Rajya Sabha that:
- In 2023–2024, 2,800 fraudulent GST registrations were detected, obtained using stolen or frozen PAN/Aadhaar details, involving tax evasion of ₹15,085 crore.
- In 2024–2025, 1,654 fraudulent registrations were detected, involving tax evasion of ₹13,109 crore, even though biometric Aadhaar-based authentication had, by the government’s own account, already been made mandatory for GST registration.
The Court found it troubling that despite this ministerial statement on the floor of Parliament more than a year earlier, fraudulent registrations using stolen or frozen identity documents were continuing unabated. It also noted that, as per written submissions filed by the tax authorities, biometric Aadhaar authentication was in practice being carried out only in cases the system’s data-analytics tools independently flagged as “risky” — not universally.
Delhi Police’s Response Draws Judicial Criticism
The order also records a pointed observation about the Delhi Police’s engagement with the matter. Pursuant to an earlier direction, the Commissioner of Delhi Police had deputed an officer, Sub-Inspector Rajesh Kumar, to assist the Court. However, the Bench noted with concern that when questioned, the officer was not even aware of the problem or the issues involved in these cases — a fact the Court flagged as inconsistent with the seriousness the situation demanded, even while acknowledging that deputing an officer at all reflected some institutional intent to engage.
The Directions Issued
Faced with an admission by the respondents’ counsel that the problem had persisted for nearly nine years since the CGST Act, 2017 came into force, and finding no submission pointing to any practical difficulty in mandating universal Aadhaar-based biometric verification, the Court issued the following key directions:
- A nationwide direction to all authorities not to permit any GST registration henceforth without biometric-based Aadhaar authentication. This applies across the country, not merely within Delhi.
- Liberty granted to the authorities — including the Commissioner of CGST, the Commissioner of DGST, and the Commissioner of Delhi Police — to file objections highlighting any practical difficulties in implementing this direction.
- The authorities were directed to examine and respond to each of the ten suggestions placed on record by Senior Advocate Tarun Gulati.
- The matter has been listed for further consideration on 22 September 2026 in the Supplementary List, by which time the authorities are expected to report back on both the practicality of universal biometric authentication and the amicus’s suggested safeguards.
Why This Order Matters
The order is significant for several reasons:
- It converts individual grievances into systemic reform. What began as two individuals’ complaints about identity theft has resulted in an interim, pan-India direction affecting the GST registration process for every future applicant in the country.
- It exposes a gap between policy and practice. The government’s own statements to Parliament indicated Aadhaar-based authentication had already been “made mandatory,” yet the Court found that, on the ground, it was applied selectively based on a risk-scoring system — leaving a wide gate open for fraud.
- It quantifies the stakes. With over ₹28,000 crore in tax evasion detected across just two financial years through this single fraud vector, the order underscores both the fiscal cost to the exchequer and the very real risk to ordinary citizens whose identities are misused, potentially exposing them to tax demands, notices, and legal proceedings for businesses they never operated.
- It signals continuing judicial oversight. Rather than issuing a one-time direction and closing the matter, the Bench has kept the case alive, requiring the authorities to return with a considered response — including to a detailed technical roadmap prepared by a senior tax counsel acting as amicus curiae.
What Happens Next
The case will return before the same Bench on 22 September 2026. The respondent authorities — the Commissioner of CGST, the Commissioner of DGST, and the Commissioner of Delhi Police — are expected to place on record whether the ten proposed safeguards are feasible, and to justify or contest the interim nationwide direction on universal biometric authentication if any practical difficulties are anticipated. Until then, the direction mandating Aadhaar biometric authentication for all fresh GST registrations across India remains in force.
This article is based on the order dated 8 September 2026 passed by the Delhi High Court in W.P.(C) 12210/2026 (Neha v. Union of India & Ors.) and the connected matter W.P.(C) 6218/2026 (Vikram Kaushal v. Director General of Income Tax (Investigation) & Ors.).
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