Fraud / Fake Invoice - Clarification on various issues relating to applicability of demand and penalty provisions under the Central Goods and Services Tax Act, 2017 in respect of transactions involving fake invoices

Fraudulent input tax credit: recipients face demand, recovery and penal action; issuers face penal liability for fake invoices.

Where tax invoices are issued without actual supply, the issuer does not create a supply and thus no tax demand under recovery provisions arises against the issuer, but the issuer is liable to penal action for issuing invoices without supply; recipients who fraudulently avail and utilize input tax credit without receipt of goods or services are liable for demand and recovery of such ITC with interest and penal action under provisions addressing fraudulent availment or utilization, and those who further pass on ITC without supply are not liable for output tax demand but are subject to penal provisions for issuance of invoices and improper use of ITC.