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Due to the involvement of huge tax evasion in cases
relating to fake invoices, GST department aggressively
demands tax, interest and penalty from both the
supplier and the buyer. By this, even the bona fide buyer
gets trapped into the circle of litigation. Further
considering a new penal provision of Sec 271AAD
applicable from 01.04.2020, now Income Tax
department is also issuing notices for demand of tax,
interest and penalty on expenses claimed through such
fake invoices which are harsher than in GST law.
MEANING OF FAKE INVOICE The GST laws do not FAKE INVOICE
explicitly define fake GST invoices. However, as and
when the registered person issues a tax invoice under Provisions under
GST, without actual supply of goods or services or both,
then such issued tax invoice is termed by department as Income Tax more harsh
'fake invoice'.
than GST
PROVISIONS UNDER GST Earlier, GST department was
issuing notices to supplier, first buyer and subsequent
buyers for demand of tax, interest and penalty. Later,
CA. Krishan Garg
Central Board of Indirect Taxes and Customs, vide circular
no. 171/03/2022- GST dated 6th July 2022 has addressed this
issue and gave clarifications on fake invoicing and applicability of demand
& penalty as follows: -

S.No. Case Demand of Penalty Quantum of Penalty
Tax /Interest

1 `A' issued only a tax invoice No, since there is Penalty under Rs. 10000 or ITC passed on
to `B' without actual supply no supply u/s 7 section 122(1)(ii) whichever is higher.
of Goods/Services

`B' took credit on fake Demand can be Penalty under section 74 If paid before issue of
invoice issued by raised for ITC for wrong availment SCN-15% of Tax involved.
`A' and utilized the wrongly availed of ITC. No separate If paid within 30 days of
2
same without issuing in contravention penalty under section 122 issue of SCN- 25% If paid
further fake invoice to provision of within 30 days of order- 50%
section 16(2)(b) In other cases – 100%
along with
interest u/s 50.

Recipient `B' took credit on No demand of tax Penal under section Sec. 122(1)(ii) Rs. 10000 or
fake invoice issued by on `B' since there 122(1)(ii) and 122(1)(vii) ITC passed on whichever is
3
`A' and further issued is no supply against Mr. B for issuance higher. Sec. 122(1)(vii)
fake invoice to another involved of fake invoice and Rs. 10000 or ITC availed /
party `C' utilizing ITC without actual ITC passed on whichever
receipt of Goods is higher.
and/or services.

Note: In addition to the above, tax payer can be arrested u/s 69 or prosecuted u/s 132 of CGST Act, 2017

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