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of <h1>Karnataka GST Act: Fake Invoices Not Taxable, But Penalties Apply u/ss 122 and 74 for Fraudulent ITC Claims.</h1> The circular issued by the Commissioner of Commercial Taxes, Karnataka, addresses the applicability of demand and penalty provisions under the Karnataka Goods and Services Tax Act, 2017, concerning fake invoice transactions. It clarifies that issuing invoices without actual supply does not constitute a 'supply' under the Act, thus no tax liability or recovery is required from the issuer. However, penalties under section 122 apply for issuing such invoices. If a recipient fraudulently avails input tax credit (ITC) based on fake invoices, they are liable for recovery and penalties under section 74. Further, passing on ITC without actual supply also incurs penalties under section 122.
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