Quick Reads
- Always verify the supplier’s GSTIN and the status of their registration before accepting an invoice.
- Double-check the invoice number, invoice date, Harmonised System of Nomenclature (HSN)/Services Accounting Code (SAC) code, taxable value, and GST details.
- Look for invoices that were generated even though the delivery wasn’t made.
- Ensure that the GST rate being applied is properly applicable to the goods and services being provided.
Fake Goods and Services Tax (GST) invoices can put the firm at risk of financial losses, Input Tax Credit (ITC) risks, and GST-related compliance risks. These invoices might have a correct Goods and Services Tax Identification Number (GSTIN), may not provide accurate tax data, or the details will not reflect in actual tax transactions.
Businesses are required to check carefully all details of the invoice as well as the details of the suppliers before accepting the invoice and claiming Input Tax Credit (ITC), where applicable. This guide identifies and details how to look out for signs of fake GST invoices, verify GSTINs, check invoice contents and forms, and understand fraud schemes.
What Is a Fake GST Invoice?
The emergence of fake GST invoice fraud has become a major concern; while many cases use fake GST invoices, such invoices are usually claimed with fraudulent or ineligible ITC. GST was introduced by the government in 2017 to bring in a unified indirect taxation regime.
False invoices may be generated for fake supplies of goods/services, carry incorrect details of the supplier, or be created to make incorrect ITC claims and to defraud tax. Accordingly, businesses must be vigilant and make proper verification of invoices prior to booking invoices and availing ITC.
How Can You Identify a Fake GST Invoice?
Here are 6 ways to help you identify a fake GST invoice:
1. Registered Taxpayer
Confirm if the supplier is registered under the GST regime and whether the registration particulars match those appearing in the invoice. The supplier’s legal name, GSTIN and available particulars should correlate with those appearing in the invoice.
GST registration requirements depend on applicable conditions, the nature of supply and other provisions under GST law. Therefore, businesses should verify the supplier’s actual GST registration status rather than relying on a single turnover threshold.
2. GSTIN Verification
GSTIN is a unique 15-digit identification number of the taxpayer registered under the scheme. Additionally, it is always necessary to check whether the GSTIN mentioned on the bill belongs to the dealer whose name is specified on the bill.
The GSTIN structure includes:
- Two characters representing the state code
- Ten characters corresponding to the PAN
- A 13th character representing the number of registrations linked to the same PAN in the state
- A 14th character, generally “Z”
- A 15th check character
3. GSTIN Verification on the Government Portal
The supplier’s GSTIN can be checked through the GST Portal’s taxpayer search facility.
To verify the GSTIN:
- Visit the official GST Portal.
- Select Search Taxpayer.
- Choose the GSTIN/UIN search option.
- Enter the GSTIN and captcha.
- Review the taxpayer information displayed.
- Match the displayed details with the supplier information on the invoice.
There should be scrutiny if the GSTIN and the supplier details are different before processing the invoice.
4. Correct GST Rate
Verify if the GST rate applied is the appropriate one on the goods or services provided. Inappropriately applied tax rates may not be correctly reflected in the value of the invoice and may create challenges for reconciliations and compliance.
Businesses should refer to the applicable GST rate notifications and official government resources when verifying the rate.
5. HSN/SAC Code Verification
Check whether the HSN code for goods or applicable SAC/accounting classification for services matches the nature of the supply. The description of the goods or services should be consistent with the classification and tax rate used on the invoice.
How Can You Report a Fake GST Invoice in India?
If you suspect a fake GST invoice, reporting it promptly helps avoid liability and supports compliance.
- Verify Before Reporting: Confirm the GSTIN and invoice details, such as the supplier’s name, registration, and filing status, from the relevant GST portal.
- File a Complaint on the GST Portal: Go to the official portal of GST and complain to them in the grievances or complaints section if you find any wrong activities.
- Email GST Authorities: Send details of the suspected fraud to the GST helpdesk with supporting documents, such as invoice copies.
- Contact the GST Helpline: Make sure to use the correct GST helpline number and voice all issues and query any steps you should take next.
- Inform Your CA or Tax Consultant: Speak to a certified professional before taking any step to avoid compliance errors or improper documentation.
- Maintain Records: Save all written communication, bills, and copies of payments as a record to present if needed by officials.
Conclusion
Fake GST invoices can easily lead to avoidable financial & compliance risks, whereby businesses avail ITC without proper verification of the underlying transaction. An analysis of the supplier GSTIN, invoice particulars, HSN/SAC, GST rate, actual supply, and e-invoices can enable businesses to take note of it early on.
For companies, correct GST record-keeping can further assist in improved cash flow and working capital management. At Lendingkart, we provide business loans that can fulfill the working capital and other financial needs of an eligible company. You can compare business loan options offered by Lendingkart and learn the related eligibility criteria, interest rates, charges, and repayment policies if they are applied before submitting an application.
FAQs
1. What Is a Fake GST Invoice?
A fake GST invoice refers to a bill that shows a non-existent transaction. It is defined as a GST invoice which is not backed by the actual supply of goods/services and which would be used by a fraudulent party for the claiming of ITCs.
2. How Can I Verify Whether a GST Invoice Is Genuine?
Check the supplier GSTIN, match invoice data against transaction data, check the applicable GST rate and HSN/SAC code, and check e-invoice details if applicable.
3. What Happens If I Claim ITC on a Fake Invoice?
An ineligible ITC claim may be reversed and can result in applicable interest, penalties or other proceedings under GST law.
4. Can an Unregistered Seller Issue a GST Tax Invoice?
Normally, an unregistered person would not issue a GST tax invoice and charge GST as a registered supplier.
5. What Are the Common Signs of a Fake GST Invoice?
Some suspicious indicators that might raise an issue could include the supplier’s and customer’s GSTIN numbers being incorrect or irrelevant, supplier-specific details being wrong, incomplete details of invoice, the HSN/SAC code being wrong or inappropriate, and no value on the invoice.
