₹260 Cr Fake Billing Scam in GST: What Happened?
A massive fake billing scam in GST has been busted in Mandi Gobindgarh, Punjab. The case involves the generation of bogus invoices amounting to ₹260 crore through shell companies dealing in scrap and iron trade.
This incident is yet another wake-up call on how fake invoicing impacts the entire GST ecosystem — especially honest businesses.
What is a Fake Billing Scam in GST?
Fake billing refers to the issuance of GST invoices without any actual supply of goods or services, mainly for:
- Wrongful ITC claims
- Showing inflated turnover
- Circular trading to adjust tax liabilities
- Facilitating bogus refunds
Under Section 122 and 132 of the CGST Act, 2017, such offences attract penalties and even imprisonment up to 5 years if the tax evasion exceeds ₹5 crore.
How the ₹260 Cr Scam Was Done
According to official sources:
- Bogus firms were floated in the names of untraceable individuals.
- These firms issued fictitious invoices to various buyers in Punjab and other states.
- No physical movement of goods occurred — only paper trail existed.
- DGGI Chandigarh zonal unit arrested two persons under Section 69 read with Section 132 of the CGST Act.
📖 Legal reference: CGST Act Section 132 – Punishment for offences
What Does This Mean for Honest Taxpayers?
If you’re unknowingly dealing with a fake firm, you lose the ITC, even if the invoice is genuine-looking. As per Supreme Court observations in cases like Bharti Airtel Ltd vs. Union of India, input tax credit is a “concession” not a “right”, and you must ensure supplier compliance.
Impact on compliant businesses:
- ITC mismatch in GSTR-2B
- Reversal under Rule 36(4)
- Risk of DRC-01A notices
- Longer refund delays
- Increased scrutiny during GST audits
How to Avoid Getting Trapped in GST Fraud Chains
Here are some practical safeguards every business must follow:
✅ Check supplier’s GSTIN on the GST Portal
✅ Monitor GSTR-2B vs. GSTR-3B ITC regularly
✅ Avoid dealing with firms with no physical office or workforce
✅ Ask for e-way bill and transporter details
✅ Don’t buy solely based on cheaper rates — verify reputation
✅ Report suspicious vendors to your GST officer
Expert Tip
“Don’t just verify GST registration — check whether the vendor actually files GSTR-1 and GSTR-3B monthly. If they don’t, your ITC may not reflect in GSTR-2B. That’s a red flag.”
— CA Ritesh Dugar, Indirect Tax Consultant
Relevant Legal Provisions
| Legal Section | Summary |
|---|---|
| Sec 122 CGST Act | Penalty for issue of fake invoices |
| Sec 132 CGST Act | Prosecution for fraud above ₹5 Cr |
| Rule 36(4) | Restricts ITC to GSTR-2B-matching entries only |
| Sec 69 CGST Act | Power to arrest in case of cognizable offences |
GST Intelligence Action: DGGI’s Role
The Directorate General of GST Intelligence (DGGI) has become proactive in using:
- PAN–GSTIN linkage analysis
- AI-powered invoice matching tools
- E-invoicing compliance patterns
- Financial trail analysis
The crackdown in Mandi Gobindgarh is part of a broader strategy to clean up ITC frauds in scrap trade, construction, and metal industries.
Final Thoughts: Clean Your Vendor Chain
Fake billing scams like this affect your cash flow, credibility, and peace of mind. With Section 16(2)(c) of the CGST Act putting the burden on the recipient to ensure vendor tax payment, proactive vendor vetting is no longer optional.
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FAQs on Fake Billing in GST
Q1. Can I claim ITC if the supplier issues a fake invoice but files GSTR-1?
Ans: No. If there’s no real supply and the department proves it, your ITC will be reversed under Rule 36(4).
Q2. What’s the punishment for fake invoicing under GST?
Ans: Jail up to 5 years, plus fine. If tax evasion exceeds ₹5 Cr, it’s a non-bailable offence.
Q3. How to report a fake invoice dealer?
Ans: Use the GST Portal grievance section or contact your jurisdictional GST officer.
Summary
The ₹260 crore fake billing scam in Punjab exposed how bogus GST invoices were used to illegally pass input tax credit. Learn how such frauds impact honest businesses and what precautions to take to safeguard your ITC claims.