Summary: GST officials have raised tax demands of approximately ₹1 lakh crore due to fake invoices for the 2017-18 financial year. Taxpayers who can substantiate their invoices with proper documentation should appeal, as courts have granted relief in similar cases. Those unable to provide evidence should consider paying the GST amount before filing an appeal within 90 days. If they have an Electronic Credit Ledger (ECL) balance, they can make payments via DRC-03 without cash outflow. Courts are unlikely to waive the GST amount in such cases, but a one-time amnesty scheme may be introduced. Interest at 18% per annum applies from the date of ITC credit until payment, but if taxpayers had a sufficient balance in IGST/CGST/SGST at the time, they may not be liable for interest. A CA certificate can support this claim in appeals. Penalties range from 50% to 100% of the tax amount, depending on payment timing. An amnesty scheme may provide partial or full relief on penalties and interest, with benefits varying based on when the tax is paid—before summons, SCN issuance, or appeal filing. Taxpayers who unknowingly received fake invoices should resolve the issue promptly to avoid prolonged financial and legal burdens.
For those Taxpayers who are able to substantiate their Tax invoices:
All taxpayers who are sure that their invoices are not fake and have supporting documents to substantiate the same should take up their matter with the appellate authorities; since there are very high chances of success as many high courts and Hon’ble supreme court have granted relief in similar cases.
For those Taxpayers who are not able to substantiate their Tax invoices:
All taxpayers who are not able to substantiate their invoices we hereby suggest for the amount of Input tax, interest and penalty separately as under:
Input tax credit
It is suggested to pay amount of GST as early as possible particularly before filing of appeal, which is required to be filed within 90 days of receipt of order of adjudication.
Moreover if you have sufficient balance in your ECL which is not expected to be utilized, you should pay amount of tax by making payment through DRC 03 from your ECL i.e. without payment in cash.
As per our understanding courts will not grant waiver of GST amount in such cases.
As numbers of such cases are numerous, thus, amount involved for the revenue is huge too. So, we can expect some one time amnesty scheme, but we don’t hope that the amount of tax will be waived at all.
Interest
As per Section 50 of the CGST Act, 2017, in all such cases simple interest @18% pa is payable, from date of credit of ITC till date of payment of GST.
However, if you have sufficient balance in respective IGST/CGST/SGST, ECL from date of input of each invoice till date of DRC 03 on any particular date, no interest is liable to be paid.
All such Taxpayers who are not liable to pay any interest as stated above must get a CA certificate in this regard and should submit with their appeal stating that no interest is payable by them.
Penalty
As per law , penalty @50% of tax is payable u/s 74 of CGST, if tax interest and penalty is paid within 30 days of issue of order. If paid after 30 days penalty @ 100% of tax amount is liable to be paid.
There are very high chances of Amnesty scheme for waiver of full or partial penalty/ Interest which will depend on timing of payment of tax as paid:
1. Before issue of summon
2. Before issue of SCN
3. Before filing appeal
4. After filing of appeal
Conclusion:
We appreciate that payment of tax and interest on such fake invoices is an extra burden on Taxpayers who might have purchased the goods genuinely but the supplier provided the invoice from any other supplier who proved to be a fake one.
So, it is suggested to get out of this situation as early as possible to attain mental peace.
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