Facts of the Case:

The Delhi High Court was dealing with two writ petitions, W.P.(C) 6218/2026 and W.P.(C) 12210/2026, wherein the petitioners alleged that fraudulent GST registrations had been obtained by third parties by misusing their PAN and Aadhaar particulars, resulting in GST liabilities being created in the names of persons who had no connection with the alleged businesses. Noting that this was the second such case before it within a short span, the Court, by order dated 21.08.2026, expressed concern over the possibility of rampant fraudulent GST registrations and requested senior counsel Mr. Tarun Gulati to suggest measures to curb the misuse. The Court also issued notice to the Commissioner of Delhi Police.

Issue:

Whether effective technological, verification and enforcement mechanisms should be devised by the GST authorities and Delhi Police to prevent fraudulent GST registrations obtained by misuse of the PAN and Aadhaar details of innocent persons and to protect such persons from consequential tax liabilities.

Held That:

The Delhi High Court noted that the problem of obtaining fraudulent GST registrations by using the PAN and Aadhaar numbers of innocent citizens had been rampant since the implementation of the CGST Act, 2017. The Court expressed serious concern that, despite nearly nine years having elapsed since the introduction of GST, the authorities had not been able to effectively curb the malpractice. The Court observed that such fraudulent registrations not only cause serious prejudice to innocent citizens, who may subsequently face substantial GST liabilities, but also result in huge revenue loss to the Government.

Pursuant to the Court’s directions, several preventive measures were suggested, including mandatory facial recognition with Aadhaar, video-based verification of PAN and Aadhaar, preservation of the applicant’s IP address and device/location details, mandatory or risk-based physical verification of the principal place of business, real-time sharing of registration data with the Income Tax Department and communication to the PAN holder, system flags for sudden increases in turnover, real-time confirmation from Aadhaar holders regarding the proposed business, alerts through DigiLocker, creation of specific DGARM risk parameters for first-time use or PAN-Aadhaar mismatch, and nomination of identifiable persons who could corroborate the applicant’s identity and business existence.

The Court observed that, although the Commissioner of Delhi Police had deputed an officer to assist the Court, the officer was not even aware of the problem involved. Considering the seriousness of the issue, the Court granted the Commissioner, CGST, Commissioner, DGST and Commissioner of Delhi Police a last opportunity to find an effective solution. The Court made it clear that, failing an effective solution, it would have no option but to pass appropriate and effective orders. The matters were consequently listed for 08.09.2026.

The order underscores the need for robust identity verification and technology-driven safeguards at the GST registration stage, as fraudulent GSTINs obtained using stolen PAN/Aadhaar details can expose innocent persons to substantial tax liabilities while simultaneously facilitating revenue leakage.

Case Name: NEHA & ORS. vs. UNION OF INDIA & ORS. dated 01.09.2026

Citation No. 2026 Taxo.online 2641