In the recent past, GST Department has caught various fraudulent cases of Input Tax Credit. Fake invoice are issued without any actual supply of goods or services with an aim of claiming ITC and reduce GST output liability. To curb this, Finance Act,2020 has brought amendment to penalty provisions of Sec 122 & Sec 132 of CGST Act and has also introduced Sec 271AAD in Income Tax ACT applicable from 01.04.2020.
Sec 122(1A) of CGST Act
New Sub-section (1A) inserted to Sec 122 of CGST Act-
1. Who are covered?
Beneficiary of transactions and at whose instance transactions are conducted.
2. What are the transactions?
- Supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply;
- Issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made there under;
- Takes or utilises input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made there under;
- Takes or distributes input tax credit in contravention of section 20( related to Input Service Distributor), or the rules made there under.
3. What is the penalty?
Equal to the amount of tax evaded or ITC availed.
Amendment to Sec 132 of CGST ACT
1. Who are covered?
Before the Amendment, only the person who commits the offence was liable for punishment but now,
- whosoever commits,
- causes to commit and
- also who retains the benefits arising out of the offences
are liable for punishment.
2. What are the offences liable for punishment?
Sec 132 covers many offences, the following is the list ( after amendment) that covers fake invoicing-
- supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax
- issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax;
- avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill
- collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due;
- evades tax, or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d);
3. What is the punishment?
Cognizable and Non bailable leading to Imprisonment.
Sec 271AAD of Income Tax Act-
- Penalty under this Section in Income Tax can be imposed to in addition to any other penalty on an assessee.
- Penalty can be levied only when identified during any proceedings in Income Tax Act i.e. assessment, reassessment, search or survey or any other proceedings.
1. When can the Penalty be Imposed?
When the AO finds that in the books of accounts maintained by a person there is-
(i) a false entry; or
(ii) an omission of any entry which is relevant for computation of total income of such person, to evade tax liability,
2. What is the quantum of penalty?
Sum equal to the aggregate amount of such false or omitted entry. Assessing officer has been given a discretionary power to impose penalty.
3. Who are covered?
Not only the person but “Any other person” who causes the first person to make false entry or omit or causes to omit any entry shall be liable to pay similar penalty.
False Entry includes use or intention to use
- forged or falsified documents such as a false invoice or, in general, a false piece of documentary evidence; or
- invoice in respect of supply or receipt of goods or services or both issued by the person or any other person without actual supply or receipt of such goods or services or both; or
- invoice in respect of supply or receipt of goods or services or both to or from a person who does not exist.