Steps Entrepreneurs Can Take to Prevent GST-Related Frauds

GST fraud is a growing concern for Indian businesses, especially for entrepreneurs striving to stay compliant while managing operations. Fraudulent practices, such as fake invoicing, wrongful ITC (Input Tax Credit) claims, and dealing with non-compliant vendors, can lead to financial losses and legal complications. As an entrepreneur, it is crucial to understand how to protect your business from such risks. 

For instance, in the financial year 2024–25, GST authorities uncovered over 25,000 fake firms that were fraudulently passing ITC amounting to ₹61,545 crore, highlighting the urgent need for businesses to stay vigilant and adopt preventive measures against GST fraud.

So, let us learn how to prevent GST frauds and comply with the GST laws in India in 2025.

How to Prevent GST Frauds in 2025?

Here are the ways to prevent GST fraud in India:

1. Check Your Vendors

Conduct due diligence by checking your vendors’ GSTIN (GST Identification Number) on the unified GST portal. This helps verify whether the vendor is active and registered, ensuring that you receive genuine invoices and avoid incorrect ITC claims.

1. File GST Returns Timely

You can avoid additional penalties, interest and late fees by submitting GST returns within the stipulated deadline. The irregular or late filing of GST returns results in penalties and a business audit. You can set reminders on automated tools to ensure timely filing. 

For instance, if your GST return filing due date is 30th September, ensure you set a reminder before the mentioned date. 

2. Comprehend ITC

Fraudulent ITC claims are a common area of GST fraud. Ensure you know the ITC rules before you claim to avoid such fraud. You can avoid this fraud by checking invoices to ensure your suppliers have deposited taxes accurately. As a business, you can claim ITC only if your vendor has filed returns correctly. 

3. Be Aware of Fake Invoices

Fake invoice issuance is a common fraud in the GST system. Ensure you avoid working with businesses that issue suspicious invoices. Further, you should accept properly formatted invoices to avoid discrepancies. 

For instance, if an invoice issued to you does not include the invoice number or issuance date in DDMMYYYY format, such as 30th June 2025, you should not accept that invoice. An invoice should include all the necessary details. 

4. Conduct Regular Audits

Conducting regular audits ensures transparency and helps you avoid adverse legal implications. You can check your GST bills, tax returns and credits periodically to identify mistakes, if any. Audits further help you be ready to face the government in case of inspections. 

Conducting a GST number check for your vendors can further help you comply with the GST regulations in India. 

5. Use Reliable GST Software

Using reliable software helps avoid manual errors in invoice generation, tax calculation and return filing. This ensures compliance with the GST laws in India. Ensure you choose high-accuracy software to avoid GST fraud. 

6. Avoid Dealing with Unregistered Suppliers

If you deal with an unregistered supplier, you might face challenges in claiming ITC. As a result, it is advisable that you avoid unregistered suppliers. Choosing registered suppliers can help you operate in compliance with the GST rules and regulations. 

Conclusion

To answer your question of how to prevent GST frauds, it is essential to mention that checking your vendor, adhering to due dates of return filing and GST payment, dealing with registered dealers, claiming correct ITC and using reliable software are some of the measures.

You need to additionally be aware of fake invoices and conduct regular audits to avoid GST fraud. Ensure you comply with the GST laws to avoid paying penalties, interest and late fees. You can avoid adverse legal consequences by adhering to the GST laws.