How to deal with Fake Invoices under GST
                     HOW TO DEAL 
WITH FAKE 
INVOICES UNDER 
GST?
The introduction of the GST in India in July 2017 
aimed to simplify the tax system and reduce the 
compliance burden for businesses. While GST 
has been successful in achieving these goals, it 
has also brought about challenges, including 
instances of fraudulent activities involving fake 
invoices. Fraudsters have been creating and 
using fake invoices to fraudulently claim Input 
Tax Credit (ITC) under the GST system.
Here, in this article, we wil l  discuss how to deal 
with fake invoices and what actions to take after 
a fake invoice has been identifi ed.
WHAT IS A GST 
IAN fakeV invoice under GST refers to a deceptive document that is created to falsely reOpreseIntC a traEnsac?tion for the purpose of evading taxes or 
fraudulently claiming benefi ts under the GST system. It is a fraudulent 
practice where individuals or businesses generate invoices for goods or 
services that were never actually supplied or received.
UNDERSTANDING FAKE 
INVOICES AND THEIR 
IMPAFCake iTnvoices are deceptive documents created by fraudsters to falsely 
claim purchases of goods or services they never actually made. These 
invoices enable fraudsters to fraudulently claim ITC, resulting in fi nancial 
losses for the government and an unfair advantage for the perpetrators. 
Fake invoices pose a threat to the integrity and eff ectiveness of the GST 
system, requiring businesses to adopt strategies to combat this 
fraudulent practice.
TAKING PRECAUTIONARY 
MEASURES TO DEAL WITH FAKE 
IToN eff eVctivOely ItaCckleE thSese  frUaudNs, it Dis imEpoRrtan t Gto establish a system that can identify suspicious entities at an early stage and promptly detSectT GST frauds. This is especially crucial 
because many of these fraudsters tend to operate by impersonating dummy individuals who 
lack real assets, making it extremely diffi cult to recover any money from them if the fraud is 
discovered later on. To address this, the following safeguards are recommended as key 
elements of risk profi ling to prevent such GST frauds:
1) Scrutinizing and verifying registered taxpayers through risk profi ling to identify fraudsters 
involved in fake invoices at an early stage. Verify GSTIN via IRIS Peridot App and confi rm the 
authenticity of the taxpayer.
2) Focusing on sectors that have historically been prone to tax evasion.
3) Maintaining a database of off enders involved in fraud to prevent them from re-entering the 
system.
4) Considering certain risk indicators associated with these individuals or their 
activities, such as:
• Having multiple registrations under the same PAN (Permanent Account 
Number).
• Sharing common email addresses, mobile numbers, addresses, authorized 
signatories, or promoters.
• Allowing individuals whose registration application was rejected or whose 
registration was canceled to reapply.
• Noting l ive registrations under the same PAN within the CGST jurisdiction 
where an off ense has been reported by the SGST authorities.
By implementing these measures and conducting comprehensive risk profi ling, 
authorities can enhance their abil ity to detect and prevent GST frauds, ensuring 
a more robust and trustworthy tax system.
IDENTIFYING FAKE INVOICES 
UNDER GST AND HOW TO 
DTheE staAndaLrd o peWratingI pTrocHedur e fTor dHetecEtingM and tackling fake invoice fraud in GST involves several steps. Here is a simplifi ed explanation of the process:
1. Identifi cation
The fi rst step is to identify entities involved in generating fake invoices. Risk parameters 
are used to identify these entities, such as:
• Multiple GSTIN registrations for one address or PAN.
• Incomplete or incorrect addresses used for GSTIN.
• Taxpayers dealing with sensitive commodities.
• Common email addresses, mobile numbers, addresses, authorized signatories, or 
promoters for multiple GSTINs.
• Mismatch between declared premises and volume of goods transacted.
• Mismatch between transaction details in GST returns and e-way bil ls generated.
• PAN involved in any “fake invoice” or other GST frauds appearing in GSTR1A or GSTR 2A.
• Abnormal uti l ization of Input Tax Credit (ITC), such as above 95%
2. Investigation
The aim of the investigation is to establish that there was an actual supply of goods or 
services by the supplier who issued the fake invoices under GST. This involves steps such 
as:
• Conducting searches of declared premises to prove the lack of or inadequate 
manufacturing facil it ies.
• Checking indicators l ike electricity and water consumption that don’t match the 
declared quantity of goods manufactured.
• Lack of facil it ies and space to handle the traded goods.
• Suppliers of invoices have no premises for dealing with the goods.
• Non-existence of required inputs, input services, or valid 
clearances/l icenses/permissions.
• Lack of necessary agreements between entities.
• Absence of e-way bil ls.
• Fake vehicle numbers shown in e-way bil ls or invoices.
• Comparing details provided to other agencies l ike Income Tax and Registrar of 
Companies.
• Cross-referencing vehicle details with records from the Regional Transport Offi ce (RTO).
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