Ujjwala Bhagwat
Joint Director
What do you mean by fake invoice?
Section 16 of the CGST Act, 2017 provides criteria for eligibility and conditions for taking
ITC.
(1) Every registered person shall, subject to such conditions and restrictions as may be
prescribed and in the manner specified in section 49, be entitled to take credit of input
tax charged on any supply of goods or services or both to him which are used or
intended to be used in the course of furtherance of his business and the said amount
shall be credited to the electronic credit ledger of such person.
Section 122 of the CGST Act, 2017 provides for a list of offences;
(1) Where a taxable person who---
(i)----
(ii) Issues any invoice or bill without supply of goods or services or both in violation of the
provisions of this Act or the rules made thereunder;
(iii)-----
(vii) Takes or utilise input tax credit without actual receipt of goods or services or both
either fully or partially, in contravention of the provisions of this Act or the rules made
thereunder
He shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to -------
-------------------, input tax credit availed of or passed on or distributed irregularly, ----------
---------, whichever is higher.
Punishment For Issuance Or Receipt Of
Fake Invoices
Section 132 of the CGST Act, 2017, provides a list of offences;
(1) Whoever commits any of the following offences, namely:-
(a) ----
(b) Issues any invoice or bill without supply of goods or services or both in
violation of the provisions of this Act, or the rules made thereunder
leading to wrongful availment or utilisation of input tax credit or refund
of tax
(c) Avails input tax credit using such invoice or bill referred to in clause (b)
(d) --------
() ------
Punishment For Issuance Or
Receipt Of Fake Invoices
Shall be punishable ---------
(i) In cases where the amount of tax evaded or the amount of input
tax credit wrongly availed or utilised or the amount of refund
wrongly taken exceeds five hundred lakh rupees, with
imprisonment for a term which may extend to five years and with
fine;
(2)---
(5)The offences specified in clause (a) or clause (b) or clause © or
clause (d) of sub-section (1) and punishable under clause (i) of that
sub-section shall be cognizable and non-bailable.
Types Of Movement Of Fake
Invoices
1. LINEAR movement
2. Circuitous movement
Linear Movement
A
E B
D C
Flow of invoices
1 2
5 2 1 3
X Y
4 3 5 4
1
5 Z 2
4 3
Source of Detection
• Informer
• Data analysis
Case Study -1
• More than 90% payment of service tax was made through Cenvat
Credit.
Case Study -1__Cont…..
• For the Service Tax, the assessee accepted that they had collected service tax from
their clients and the same time they passed on the tax to their vendors and
accordingly they had sufficient Cenvat Credit to discharge their tax liability.
• When they were asked for the copy of invoices in support of their claim in respect of
• On verification of invoices, it appeared that the vendors were not registered with the
• Later on the director of the assessee also accepted the fact that
• During GST era it was observed that X was involved in issuance of bogus invoices
to pass on the ITC to their clients
• At the same time they also procured invoices without receipt of any services or
goods and availed ITC on those invoices.
• Final beneficiary i.e. Z who had availed ITC on the strength of invoices of X,
encashed the ITC by filing refund claim of unavailed ITC against export of
services.
Case Study -1__Cont…..
C to X,
• In this chain every person passed on Input Tax Credit and whereas Z
availed the Input Tax Credit and claimed this ITC against export of
services and claimed refund claim from the GST Department and received
the same.
Case Study -1__Cont…..
• In this case another company Y was also involved who was actually
providing services to Z
invoices.
been arrested.
• The main beneficiary, Z accepted their liability, submitted a schedule