Intro
GST fraud via fake invoices has once again made headlines after an accountant hacked his employer’s GST portal, allegedly generating fake invoices to siphon off ₹1.80 crore. This case is a stark reminder that GST compliance is not just about filing returns—it’s also about securing access and preventing insider misuse.
The Case in Brief
- Location: Reportedly in India (state details withheld for investigation)
- Amount Involved: ₹1.80 crore
- Method: Hacked GST portal access, created fake invoices, claimed fraudulent input tax credit (ITC)
- Status: Police complaint filed; investigation underway
- Legal Basis: Action likely under Section 132 of the CGST Act, 2017 (Punishment for certain offences)
Legal Provisions for GST Fraud via Fake Invoices
| Provision | Description | Possible Penalty |
|---|---|---|
| Sec. 132(1)(b) | Issue of invoice without supply of goods/services | Imprisonment up to 5 years + fine |
| Sec. 132(1)(c) | Availing ITC without actual supply | Imprisonment up to 5 years + fine |
| Sec. 132(5) | Offences are cognisable & non-bailable if amount > ₹5 crore | Immediate arrest possible |
| IT Act, 2000 | For hacking and unauthorised access | Imprisonment + fine |
(Source: CBIC GST Law)
Key Risks Revealed by This Case
- Weak Internal Controls: Shared passwords or unsecured login credentials
- Inadequate Monitoring: No periodic reconciliation of invoices with actual supply
- Overdependence on Single Staff: No maker-checker process
- Lack of Cybersecurity Measures: GST portal passwords not updated regularly
- Poor Vendor Due Diligence: Fake vendor entries not detected early
How Businesses Can Prevent GST Fraud
- Enable Two-Factor Authentication for GST portal access
- Segregate Duties – separate the invoice creation role from the GST filing role
- Change Credentials immediately after staff exits or role changes
- Use GST Reconciliation Tools to match GSTR-1, GSTR-3B, and e-way bills
- Regular Internal Audits to detect anomalies early
- Training for Staff on legal consequences of GST fraud
Expert View – Why Insider GST Fraud Hurts More
“Unlike external cyberattacks, insider GST fraud damages both financially and reputationally. Recovery is often slower, and penalties can be crippling. Businesses must treat GST portal security at par with bank account security.” – Tax & Compliance Consultant, Efiletax
FAQs on GST Fraud via Fake Invoices
1. What happens if a business unknowingly avails ITC from fake invoices?
The business is still liable to reverse ITC with interest under Section 16(2) of CGST Act, unless it proves genuine purchase.
2. Can GSTN trace fake invoices?
Yes. GSTN uses advanced data analytics to match e-way bills, invoices, and return filings to flag suspicious transactions.
3. Is GST fraud a bailable offence?
If the amount exceeds ₹5 crore, it becomes a cognisable and non-bailable offence under Section 132(5).
Summary
An accountant hacked his firm’s GST portal, issuing fake invoices worth ₹1.80 crore. Under CGST Act, such fraud invites jail up to 5 years. Businesses must adopt strict portal security and regular audits to prevent insider threats.
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