Introduction:
Fake ITC claim cases are on the rise, and GST authorities are cracking down hard. In a recent bust, a trader was arrested for availing ₹15.19 crore Input Tax Credit using fake invoices — without actual supply of goods. This incident highlights the growing risk of misusing GST benefits and the legal consequences businesses face.
What Happened?
- GST officials tracked shell firms and suspicious transactions using data analytics
- The claim was based on fake invoices issued without any actual supply of goods
- The trader was remanded to 14-day judicial custody
What Is Fake ITC in GST?
Fake ITC refers to availing tax credit based on invoices where:
- Suppliers are non-existent or unregistered
- GST returns are not filed
- There’s a mismatch in GSTR-2B vs GSTR-3B
Legal Angle: What Law Says
- Amount involved > ₹5 crore → Cognizable and non-bailable
- Section 122: Penalty up to 100% of tax evaded
- GST officers can arrest without warrant in such cases
🟢 CBDT and CBIC are using AI and network analytics to identify circular trading, dummy entities, and invoice layering.
Expert View: Stay Cautious
CA Vikram Sethi notes:
“If your ITC comes from a party with poor compliance history or incorrect filings, it can put your business at risk. Always reconcile your GSTR-2B and verify vendors on GSTN portal.”
How to Avoid Fake ITC Risks
Here’s a quick checklist for businesses and consultants:
✅ Match GSTR-2B with GSTR-3B monthly
✅ Verify GSTIN of vendors via gst.gov.in
✅ Do not deal with firms showing unusually high turnover with minimal infrastructure
✅ Keep transport docs, e-way bills, purchase orders, and delivery proof
Table: Penalties for Fake ITC Claims
| Amount of Tax Evasion | Offence Type | Punishment |
|---|---|---|
| ₹50 lakh – ₹2 crore | Non-cognizable | Jail up to 3 years + Fine |
| ₹2 crore – ₹5 crore | Cognizable & Bailable | Jail up to 5 years + Fine |
| Above ₹5 crore | Cognizable & Non-Bailable | Jail up to 5 years + Fine |
Subheading: Fake ITC Claim — A Growing Concern
The term fake ITC claim has seen increased Google searches in India due to:
- Strict enforcement by GST intelligence
- High-profile arrests across Delhi, Gujarat, Maharashtra
- Crackdown on “invoice-only” traders
- Use of advanced AI tools for detection
FAQ:
Q1. Can a buyer be penalised for ITC fraud by supplier?
Yes. If the buyer fails to ensure actual supply and vendor compliance, they may face penalties under Section 16 and 132 of CGST Act.
Q2. How can I verify if my supplier is genuine?
Use GST Portal to verify GSTIN, return filing status, and registration type.
Q3. What is GSTR-2B and how does it affect ITC?
GSTR-2B is a static monthly auto-drafted statement showing ITC eligibility. You must reconcile this with your purchases to avoid mismatches.
Final Words
Fake ITC frauds not only result in huge revenue loss but also hurt genuine taxpayers through delayed refunds and stricter audits. At Efiletax, we help you file accurate returns, verify your vendor trail, and stay compliant — all while saving time and effort.
🔗 Need help with ITC reconciliation or vendor risk check? Talk to Efiletax now
Summary
Trader arrested for ₹15.19 crore fake ITC claim using bogus GST invoices. Authorities highlight growing fraud risk. Learn how to stay GST-compliant, avoid penalties, and protect your business. Check our expert checklist and legal guide at Efiletax.