₹88 Cr Fake ITC Billing Scam What GST Taxpayers Must Know
The GST authorities have busted a massive scam involving fake inter-state input tax credit (ITC) billing worth ₹88 crore. The fraudulent activity, traced to iron and steel traders, involved the generation of fake invoices and GST returns across multiple states. Two individuals have been arrested.
This blog breaks down the modus operandi, legal implications, and how businesses can stay safe.
What Is Fake ITC Billing?
Fake ITC billing refers to the practice of availing input tax credit based on invoices for transactions that never occurred.
Common red flags include:
- No actual movement of goods
- Bogus supplier firms
- Circular trading across states
- Non-filing of GSTR-3B despite GSTR-1 filings
- PAN-linked multiple GSTINs with no infrastructure
Scam Highlights Iron & Steel Sector Under Watch
- Amount involved: ₹88 crore
- States impacted: Multiple (inter-state operation)
- Industry: Iron and steel
- Firms involved: Bogus entities used only for passing ITC
- Legal action: 2 key accused arrested under Section 132 of CGST Act
📌 Section 132 allows arrest in case of fake invoicing and ITC frauds above ₹5 crore.
Legal Provisions Invoked
| Provision | Summary |
|---|---|
| Section 132 (1)(b) | Deals with issuance of fake invoices and wrongful availing of ITC |
| Rule 86A | Allows blocking of credit in electronic credit ledger |
| Section 69 | Empowers Commissioner to authorize arrest if offence is cognizable |
Fraudulent claim of ITC above ₹5 crore is a non-bailable offence.
How These Fake Firms Operate
| Tactic | Description |
|---|---|
| Bogus GST registration | Created with fake addresses, documents |
| No actual goods movement | Only invoices circulated |
| Input claimed, no output tax paid | GSTR-3B not filed or ITC reversed |
| Same directors in multiple firms | Cross-billing to inflate turnovers |
Expert Tip Do Your Vendor Due Diligence
Before claiming ITC from a supplier, verify:
- Their GSTR-3B filing status
- E-way bill generation consistency
- PAN-GSTIN link
- Whether they exist at their principal place of business
Use the CBIC’s GSTIN Search Tool before onboarding new vendors.
How to Stay Compliant & Safe
- Reconcile GSTR-2B monthly
- Avoid ITC on purchases from suspicious or non-filing vendors
- Respond quickly to SCN (Show Cause Notices)
- Maintain proper goods movement proofs (e-way bills, delivery challans)
- Don’t rely only on GSTR-1 data—check GSTR-3B filing too
Subheading: Fake ITC Billing Can Ruin Your GST Profile
ITC wrongly claimed—knowingly or unknowingly—can lead to:
- Credit blockage under Rule 86A
- Cancellation of GSTIN
- Demand & recovery with 24% interest
- Arrest of directors or partners in serious cases
Summary
GST officials unearthed an ₹88 crore fake ITC scam involving bogus inter-state billing by iron and steel traders. Know the legal risks, red flags, and how to verify vendors to protect your GST compliance.
FAQs on Fake ITC Billing
Q1. Is fake ITC a bailable offence?
No, if the amount exceeds ₹5 crore, it becomes a non-bailable offence under Section 132.
Q2. Can I be penalised if my supplier was fake?
Yes. ITC is a benefit claimed by the buyer, and burden of proof lies on you.
Q3. What’s the difference between GSTR-1 and GSTR-3B?
GSTR-1 shows sales declared. GSTR-3B shows actual tax paid. Relying only on GSTR-1 can be risky.