Tax evasion under India's Goods and Services Tax (GST) regime has sharply risen, with the Directorate General of GST Intelligence (DGGI) reporting evasion reaching Rs 2.01 lakh crore in FY 2023-24, nearly doubling from Rs 1.01 lakh crore in the previous year. The steep rise underscores the increasing challenge in GST enforcement across sectors, particularly online gaming and banking, financial services, and insurance (BFSI). Mumbai has emerged as the leading zone for GST evasion detection, with other major cities following suit. As the authorities ramp up detection efforts, cases of non-compliance continue to surge, bringing voluntary payments and regulatory scrutiny to the forefront.

Record Surge in GST Evasion

Tax Evasion Nearly Doubles in FY24
According to the DGGI, GST evasion in FY 2023-24 skyrocketed to Rs 2.01 lakh crore, a substantial rise from Rs 1.01 lakh crore in the previous fiscal year. The sharp increase reflects ongoing challenges in ensuring compliance within India’s GST regime, which was designed to simplify and consolidate the country’s indirect tax system.

Online Gaming and BFSI Emerge as Key Offenders
The online gaming sector accounted for a staggering Rs 81,875 crore in evasion, making it the most significant contributor to the rising tax gap. The BFSI sector also showed substantial non-compliance, with Rs 18,961 crore in evasion. These two sectors have come under intense scrutiny due to their growing influence on the economy and complex taxation structures, making enforcement more challenging.

Sector-Wise Breakdown of Evasion

Iron, Copper, and Alloys Lead in Goods Evasion
Among goods, the sectors dealing with iron, copper, scrap, and alloys were responsible for Rs 16,806 crore in evasion across 1,976 cases. Additionally, traditional “sin” goods such as pan masala, tobacco, cigarettes, and beedis were found to have evaded Rs 5,794 crore across 212 cases. The persistent issue of tax evasion in these high-revenue goods sectors continues to complicate enforcement efforts.

Widespread Non-Compliance in Other Goods
Other sectors also witnessed significant evasion, with plywood, timber, and paper industries reporting 238 cases amounting to Rs 1,196 crore, while electronic goods faced 23 cases involving Rs 1,165 crore in tax evasion. These findings illustrate the diverse range of industries involved in non-compliance under the GST framework.

Regional Distribution of Evasion

Mumbai Tops GST Evasion Detection
Mumbai emerged as the highest zone for GST evasion detection, with authorities uncovering Rs 70,985 crore in fraudulent activity. Other key regions included Delhi (Rs 18,313 crore), Pune (Rs 17,328 crore), Gurugram (Rs 15,502 crore), and Hyderabad (Rs 11,081 crore). The high levels of evasion in these commercial hubs suggest the scale of the problem in India’s most economically active regions.

Increase in Detected Cases and Voluntary Payments

More Than 6,000 Evasion Cases Identified
The total number of GST evasion cases rose to 6,084 in FY24, compared to 4,872 cases in the previous fiscal year. This increase underscores a growing vigilance by tax authorities, who have become more adept at identifying tax evasion practices, particularly in high-risk sectors.

Voluntary Payments Increase Amid Scrutiny
Amid these cases, voluntary payments surged, with taxpayers remitting Rs 26,605 crore in 4,520 cases, up from Rs 20,713 crore across 3,683 cases in FY23. This rise in voluntary compliance suggests that increased detection efforts are driving businesses to settle their liabilities proactively.

Types of Evasion Practices

Clandestine Supply and Undervaluation Dominate
Non-payment of taxes, including clandestine supply and undervaluation, constituted 46% of the identified cases of evasion. These practices involve concealing transactions or underreporting the value of goods and services to avoid paying the full tax liability.

Fake Input Tax Credit Remains a Major Concern
The fraudulent claim of input tax credits (ITC) accounted for 20% of evasion cases. This involves businesses claiming credit for taxes they never paid, inflating their deductions and lowering their overall tax bill. Additionally, the wrong availment or non-reversal of ITC, and blocked credit, contributed to 19% of the evasion detected.

Historical Trends and Future Challenges

Steady Increase in Evasion Since GST Implementation
Since the introduction of the GST system in 2017, detected tax evasion has steadily climbed. Initial figures reported Rs 7,879 crore in 2017-18, increasing to Rs 50,325 crore in 2021-22. The upward trend reflects both the growing complexity of the GST framework and the challenges tax authorities face in enforcing compliance across diverse sectors.

The Road Ahead for GST Enforcement
The continued rise in GST evasion poses significant challenges for India's tax authorities. While detection efforts have improved, the scale and sophistication of tax evasion tactics demand even stricter enforcement and better regulatory tools. With over Rs 2.37 lakh crore in total evasion detected across 20,576 cases in FY24, the focus will be on refining compliance mechanisms and addressing loopholes in the system.