Pakistan ‘Hyderabad’ address flags fraud, GST-2 loophole exploited to float shell cos

HYDERABAD: A surge in suspicious GST registrations following the GST-2 rollout has led commercial tax authorities to uncover widespread ‘address fraud.' This exposes how traders manipulated automated approvals to create fake entities and evade taxes.

Officials say the new system, which enables swift and automated GST registration approvals, created a loophole that was quickly exploited by many applicants. Several new GST holders submitted dubious address details, ranging from manipulated documents—in some cases—to blank white papers uploaded in the address field. The intent, authorities believe, was to conceal real locations, avoid scrutiny and dodge tax liabilities.



In one striking instance, a company dealing in nappies uploaded a forged utility bill claiming it was issued by the Hyderabad Electric Supply Company (HESCO). However, officials found that the Hyderabad referenced in the document was located in Pakistan, not India. The anomaly came to light amid a massive and abnormal spike in GST registrations after the introduction of GST-2.

According to official estimates, around 300 such fraudulent registrations were suspended over the past two months, marking one of the most significant post-GST crackdowns since the tax regime was launched.

Officials attribute the surge in fraud to changes introduced under GST-2, particularly Rule 14A, which was designed to speed up business operations. Under the revised process, GST registrations could be generated automatically even before physical or field verification.

This allowed oversmart traders to float fictitious firms using fake addresses, while continuing to operate their legitimate, GST-compliant businesses in parallel.

By routing transactions through these shell entities, traders were able to move goods swiftly across state borders and evade GST payments. In several cases, PAN numbers belonging to individuals unconnected to the fake firms were also misused before the fraud was detected.

Officials in for a shock

The scale of carelessness in some applications shocked officials. "When traders attempt to secure their GST numbers, they occasionally encounter error messages in the online system," an official explained. "Some uploaded those error screenshots, while others submitted phoney sale deeds, and, shockingly, some even provided pictures of white tissue paper as their address," he added.

The red flags became evident as authorities noticed an unusual spike in registrations beginning Oct last year, peaking in Nov and Dec. A closer analysis shows that, between Nov and Dec 2025, new GST registrations rose sharply compared to the same period in 2024.

In Dec 2025 alone, registrations jumped to 11,420 from 6,571 in Dec 2024 — an increase of 4,849, reflecting a steep rise of 74%.
Similar pattern

Nov followed a similar pattern, with registrations surging to 13,860 in 2025 from 6,460 a year earlier — an increase of 7,400 registrations, translating into a striking growth rate of 115%.

By contrast, Sept saw relatively stable activity. Registrations rose marginally from 6,028 in Sept 2024 to 6,353 in Sept 2025 — an increase of just 325 or 5.4%.