The rise of scams involving fake GST invoices is of great concern. Most cases comprise the use of fake GST invoices for incorrect availing of undue input of tax credit (ITC). The government introduced the Goods and Service Tax (GST) as a successor to its predecessor VAT system on goods and services sold. It was implemented in 2017 as an effort to unify the tax systems levied by the center and states and create common tax laws. The last six years have seen an improvement in economic activity; however, there has been an equal increase in the rise of generating fake GST invoices leading to the encashment of excess ITC, money laundering, diversion of funds, and evasion of tax. As a customer, your involvement in this fraudulent activity comes in wherein you or others may have received unauthentic invoices. Here is how you, as a customer, can learn and spot fake GST invoices.
What are a GST invoice and its format?
A GST invoice is a bill generated by a seller or supplier for the services or goods offered to a customer. It lists the accurate services and/or products along with the amount due. The invoice should have the following mandatory fields:
- Name, address, and GSTIN of the supplier
- 16 characters or less tax invoice number. Note that this number must be generated consequently and be unique to that financial year.
- Issuing Date
- Invoice type
- Name of customer
- GSTIN of the customer only if they are registered
- Shipping and billing address
- Description of the service or goods
- HSN code (a number for the goods that is universally recognized)
- Quantity and unit
- Total value
- Taxable value after adjustment of discounts, if any
- The applicable rate of GST with rates of CGST, SGST, IGST, UTGST, and Cess is also mentioned
- Amount of Tax applied with breakup for CGST, SGST, IGST, UTGST, and Cess.
- For inter-state sales, the location of the supplier or supply and destination is required
- Reverse Charge
- Signature of the supplier or their authorized representative
How can you identify a fake GST invoice?
Here are 6 ways to help you identify a fake GST invoice:
- Registered Taxpayer: The seller should be registered, or the seller cannot charge GST from the customer. As per the government regulations, persons with a turnover of more than INR 20 lakhs, persons dealing will inter-state supply, persons with an e-commerce business, and any as required need to be registered under GST. Those who are not part of the above-defined categories may obtain it voluntarily.
- Goods and Service Tax Identification Number (GSTIN): It is mandatory to have this unique identification number on the invoice. This helps with claiming ITC without difficulty.
- Correct Format of GSTIN: This 15-digit code that is assigned to those registered with GST is presented in the following format:
- The first 2 characters represent the unique state code
- The subsequent 10 characters represent the permanent account number (PAN) of the business
- The 13th character represents the number of entities of the same PAN number within the state
- The 14th character is the default letter “Z”
- The last or 15th character can be a letter or number, which is used for internal checks by GST regulators.
- Verify GSTIN mentioned on the invoice:
- Visit the government GST portal (www.gst.gov.in) to check the validity of the invoice.
- Click on the “Search Taxpayer” option and subsequently click on the “Search by GSTIN/UIN” option. Enter the number and the CAPTCHA and click the “Search” option.
- If the GSTIN is valid, the search result will show the following details:
- The legal name of the supplier/business
- Date of registration of the supplier/business
- Jurisdiction of State and Centre
- Type of Supplier/Business
- The status of GSTIN or UIN
- If the GSTIN is invalid, the following message will appear “The GSTIN/UIN that you have entered is invalid. Please enter a valid GSTIN/UIN.”
- Correct GST Rates: The supplier needs to charge the correct rate of GST charges with a breakup of CGST and SGST rates as well. As a customer, you can check the rate by visiting the government portal (cubic-gst.gov.in/gst-goods-services-rates.html) or downloading the application GST Rate Finder.
- For rates on Goods: Enter the item within the “description” box and click the search button.
- For rates for services: Enter the service within the “Chapter” or “Description” box and click on the search button.
- HSN/SAC code: The invoice mentions the correct code for the goods or services. Harmonized System of Nomenclature (HSN) is a universal coding system of a unique number assigned to interest, and the Services Accounting Code (SAC) is assigned to a particular service.
You, as a customer, may also face the following fraudulent activity:
- GST on exempted items: There are around a hundred items for which GST should not be levied, which includes daily items such as grains, vegetables, eggs, milk, water, and more. However, as some customers are unaware, sellers are charging additional rates.
- GST added on VAT: Some businesses may still levy the previous VAT and CST charges, whereas some charge GST in addition to the applied VAT tax.
- GST Rates: As mentioned previously, the exact GST rates, as presented in the government portal, should be charged by suppliers or sellers on the offered goods or services. However, as customers are not aware of this, some businesses are charging higher rates than required.
As a customer, if you feel the supplier or seller is not issuing the invoice in the correct format, you may raise a complaint by writing to email@example.com or calling the GST help desk number 0120-4888999. There are also regional or state GST helplines you may contact to complain about any illegal GST activity.
The government is continuously working to tackle tax evasion and money laundering as a result of fake GST invoices and even has introduced standard operating procedures (SOPs) to identify suspicious entities during primary stages. We, as customers, can help ourselves by understanding the information mentioned above to identify these fake GST invoices.
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