Why was biometric authentication introduced for GST?

It was introduced to prevent GST frauds, especially those involving fake invoices and fraudulent input tax credit (ITC) claims.

What are GST ITC frauds?

GST ITC frauds occur when a taxpayer intentionally conducts illegal activities to reduce tax liability, often through shell companies, fake invoices, and fraudulent claims of input tax credits.

How does the biometric authentication system work for GST?

At the time of GST registration, businesses and individuals will provide biometric data such as fingerprints or iris scans. This data is stored in the system and used for authentication during GST transactions.

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Centre Introduces Biometric ID To Fight GST Fraud In India

Q: What is the pan-India Aadhaar-based biometric authentication for GST?

The GST Council decided to introduce Aadhaar-based biometric authentication to tackle fraudulent activities and ensure the authenticity of GST transactions.

Q: How do GST frauds take place?

GST frauds often involve stolen identities and fake business establishments to claim ITC credits fraudulently. Fraudsters misuse the ITC system by creating fake invoices and transactions.

Samridhi

Author

Updated: 28-01-2025 at 6:18 AM

Centre Introduces Biometric ID To Fight GST Fraud In India

The GST council decided to introduce pan-India Aadhaar-based biometric authentication at its 53rd GST Council meeting to tackle fraudulent activities. Frauds to claim input tax credit (ITC) have been happening all across India due to the lack of authentication.

GST authorities have arrested around 1,400 people for trying to evade taxes in the last five years.

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How Do GST Frauds Take Place?

The GST authorities revealed that 8,100 crore tax evasions have been carried out all across the country. These frauds take place mainly via stolen identities and fake business establishments.

A GST fraud is considered a fraud when a taxpayer intentionally does illegal activities with the motive to reduce tax. These fraudsters take advantage of tax credits of GST through shell companies and fake bills.

The fraudsters misuse the ITC system which allows businesses to buy goods at a reduced price using the taxes they have paid. They make invoices and bills to claim the ITC credits.

Types Of GST ITC Frauds

Let’s look at the main fraudulent activities carried out:

Fake GST invoices.
GST ITC misuse.
Fake transactions.

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How Does The Biometrics System Work?

Businesses and individuals registered under GST will have to update their biometric identification system. At the time of registration, data such as fingerprints or iris scans will be taken and stored in the system.

Whenever a GST transaction happens, the taxpayer will have to authenticate their transaction using the biometric data provided. This will take place for any transaction, like claiming tax credits or making payments.

The verification is done to ensure the safety and authenticity of transactions. This helps prevent identity theft and makes sure the actual taxpayer is authenticating the transaction. This system reduces the risk of frauds like fake invoices and fake claims of ITC as well.

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Benefits Of Biometrics

The usage of this system authenticates all transactions and protects taxpayers from any fraudulent activities. Other benefits are as follows.

Enhanced transparency and accountability.
Maximum prevention from fraud.
More oversight of the government.
Increases safety.
Minimise the misuse of GST identification.

“This will help us to combat fraudulent input tax credit claims made through fake invoices,” Finance Minister Nirmala Sitharaman said.

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Conclusion

This is a significant step taken by the GST Council in efforts to tackle GST fraud. This also helps India move towards a more technologically advanced nation. Biometric authentication is aimed to improve the entire system and make it more transparent for all taxpayers.

For the step-by-step Aadhaar authentication explanation, click here.

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