Goods and Services Tax (GST) has brought significant reforms to India's indirect taxation system, making it more transparent and streamlined. It subsumed most of the earlier indirect taxes. However, with the adoption of any new system, certain people may try to take advantage of unsuspecting individuals and businesses. One such common scam is the issuance of fake GST invoices. These fake invoices can lead to serious consequences, including loss of money, loss of input tax credit and even legal troubles. Thus, it is important for businesses and taxpayers to identify fake GST invoices. Let’s explore what a GST invoice is, the dangers of fake GST invoices and essential tips for verifying the authenticity of GST invoices to protect yourself from scams.
What is a GST Invoice?
A GST invoice is a crucial document issued by a registered supplier to a recipient for the sale of goods or services. It serves as evidence of the transaction and contains essential details such as the GSTIN (Goods and Services Tax Identification Number) of the supplier and recipient, invoice number, date of issuance, description of goods/services, quantity, value and applicable GST rates. Any registered taxpayer under GST law is mandatorily required to issue a GST invoice.
What is a Fake GST Invoice?
A fake GST invoice is a fraudulent document issued with the intent to deceive and manipulate the GST system and the people at large. Scammers may create fake invoices for non-existent transactions or exaggerate the value of goods/services to claim inflated Input Tax Credit (ITC). Fake invoices are often used as a means to evade taxes and engage in illegal activities, leading to revenue losses for the government and unsuspecting taxpayers.
Why You Need to Beware of Fake GST Invoices?
You need to be beware of fake GST invoices as they can have severe repercussions. This includes but is not limited to:
Loss of Money: Businesses pay GST to the supplier of goods and services. This can be claimed as an input tax credit by the payer. Fake GST involves can lead to a significant loss of money as the goods or services can be significantly overpriced or underpriced.
Loss of Input Tax Credit (ITC): For claiming an input tax credit, the recipient of goods or services needs to possess a valid GST invoice. Further, the ITC should be reflected in the GSTR-2A/2B of the recipient. If you claim ITC based on fake invoices, the tax department can disallow the credit. This can lead to significant financial losses for you.
Legal Consequences: GST department is very strict when it comes to ITC frauds. Further, it is a punishable offence under the GST law that can even lead to imprisonment if the amount involved is significant. Involvement in fraudulent activities can attract penalties, fines and even imprisonment under the GST laws.
Reputational Damage: Goodwill is one of the most important aspects of any business. Being associated with fake invoices can tarnish your business's reputation and erode customer trust.
How to Check Genuineness of GST Invoice?
To avoid becoming a victim of GST invoice scams, you should follow these essential tips to verify the authenticity of GST invoices:
Verify the GSTIN from GST Portal: You should ensure that the supplier's GSTIN mentioned on the invoice is valid and active by verifying it on the official GST portal. You can enter the PAN or GSTIN of the registered taxpayer and do the GST registration verification.
Check the Invoice Number and Date: Verify the sequence and format of the invoice number to ensure it aligns with the supplier's regular invoice series. Also, check if the invoice date is reasonable and corresponds to the transaction.
Check the Tax Amount and Invoice Value: Cross-check the calculated tax amount and the total invoice value to ensure they are accurate based on the GST rates and the transaction details.
Check the HSN/SAC Code: Ensure that the HSN (for goods) or SAC (for services) codes mentioned on the invoice correspond to the nature of the goods/services being supplied.
Check the Signature of the Supplier: A genuine GST invoice should bear the signature or digital signature of the supplier. Verify the signature to ensure its authenticity.
Check the Status of the Supplier from the GST Portal: Do the GST registration verification of the supplier and determine the GST registration status and the validity of their filing of GST returns from the official GST portal.
Check your GSTR 2A/2B: GSTR 2A/2B should be checked to ensure whether the supplier has filed a GST return. The GSTR-2A and GSTR-2B are auto-populated with supplier invoice data. Cross-check the invoice details mentioned in your GSTR-2A/2B with the invoices you have received to identify discrepancies. You should check the invoice date, invoice number, taxable value and GST amount as well as the invoice value.
How to File a Complaint Against GST Fraud?
If you come across a fake GST invoice or suspect any fraudulent activity related to GST, you should immediately report it to the appropriate authorities. Here's how you can file a complaint against GST fraud:
Gather Evidence: Collect all relevant documents and evidence related to the fake invoice or fraudulent activity.
Lodge a Complaint: Register a complaint with the GST department through an email or a written letter, providing all the necessary details and supporting evidence.
Inform GSTN: Report the fake GST invoice to the GSTN (Goods and Services Tax Network) helpdesk, along with the necessary details.
Cooperate with Authorities: Cooperate fully with the investigating authorities and provide any additional information or documentation they may require.
In a Nutshell
Verifying the authenticity of GST invoices is crucial to safeguard your business from potential scams and legal consequences. By being vigilant and following the tips mentioned above, you can protect yourself from falling victim to fake GST invoices. Remember, timely verification of GST invoices not only protects your financial interests but also contributes to maintaining the integrity and effectiveness of the GST system as a whole.
For more such insightful information, you can visit the TATA Capital website.
08 August 2023
6 mins read
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