Intro:
A fake ITC racket worth ₹11 crore has been busted by the Assam State GST Department, exposing yet another misuse of Input Tax Credit provisions under GST. The accused allegedly created multiple fake firms to issue invoices without actual supply of goods or services.
What is a Fake ITC Racket?
Fake ITC (Input Tax Credit) rackets involve generating fake invoices to wrongfully claim tax credits. These operations typically include:
- Non-existent suppliers or firms
- Invoices without actual movement of goods
- Layered transactions using shell companies
Such rackets directly hit government revenues and honest taxpayers.
Assam GST Department’s Crackdown
According to reports, the arrested individual from Boko, Assam:
- Created multiple bogus firms using stolen PAN and Aadhaar details
- Issued GST invoices worth ₹54 crore
- Wrongfully passed on fake ITC of ₹11 crore
- Violated Section 132(1)(b) and (c) of the CGST Act, 2017
He was arrested and remanded under Section 69 of the CGST Act, which empowers the Commissioner to order arrest in cases of tax evasion above ₹5 crore.
Legal Framework on Fake ITC
The GST law treats fake ITC as a serious offence:
| Provision | Description | Penalty |
|---|---|---|
| Sec 132(1)(b)/(c) | Issue of invoices without supply, or availing ITC fraudulently | Cognizable & non-bailable offence if >₹5 crore |
| Sec 69 | Commissioner can order arrest | Yes |
| Rule 86A | ITC ledger can be blocked if fraud suspected | Yes |
Expert Tip: Always verify vendor GSTIN and invoice trail. Using or passing fake ITC—even unknowingly—can result in prosecution and ITC reversal with interest.
Impact on Businesses
Even genuine businesses get caught in the crossfire:
- ITC denial from fake suppliers
- Departmental audits and show cause notices
- Interest + penalty liability even if unaware
This makes vendor due diligence and reconciliation of GSTR-2B absolutely critical.
How to Stay Safe from Fake ITC
Follow these preventive steps:
✅ Check supplier’s GST returns (GSTR-1 filing status)
✅ Use GSTR-2B auto-reconciliation regularly
✅ Avoid deals without actual goods movement
✅ Keep proof of e-way bills, transport documents, bank trail
✅ Conduct vendor KYC before onboarding
Related Update: CBIC Tightening Rules
The CBIC recently issued Circular No. 181/13/2022-GST clarifying restrictions on ITC based on GSTR-2B matching and Rule 36(4). This supports stricter scrutiny on fake ITC-linked transactions.
Final Thoughts
Fake ITC rackets don’t just defraud the government—they make compliance tougher for everyone else. Don’t risk your GST credit. Stay compliant, conduct vendor checks, and use platforms like Efiletax for expert GST filing support.
CTA:
Facing ITC mismatch or vendor issues? Get expert GST support from Efiletax.
Talk to our GST Expert →
FAQs
Q1. What is fake ITC under GST?
Fake ITC refers to input tax credit claimed using invoices without actual supply of goods or services.
Q2. Is using fake ITC a criminal offence?
Yes, as per Sec 132 of CGST Act, if amount exceeds ₹5 crore, it’s a cognizable offence.
Q3. How can I check if a supplier is genuine?
Use the GST portal to verify GSTIN, return filing status, and compare GSTR-2B entries.
Summary
Assam GST Department busts ₹11 crore fake ITC racket involving bogus invoices and shell firms. Arrest made under CGST Act Sections 69 and 132. Learn how fake ITC impacts businesses and how to safeguard your GST credits with vendor checks and expert support.