TMI BlogClarification on various issues relating to applicability of demand and penalty provisions under the Karnataka Goods and Services Tax Act, 2017 in respect of transactions involving fake invoicesX X X X Extracts X X X X X X X X Extracts X X X X ..... pect of transactions involving fake invoices - Reg. A number of cases have come to notice where the registered persons are found to be involved in issuing tax invoice, without actual supply of goods or services or both (hereinafter referred to as fake invoices ), in order to enable the recipients of such invoices to avail and utilize input tax credit (hereinafter referred to as ITC ) fraudulently. Representations are being received from the trade as well as the field formations seeking clarification on the issues relating to applicability of demand and penalty provisions under the Karnataka Goods and Services Tax Act, 2017 (hereinafter referred to as KGST Act ), in respect of such transactions involving fake invoices. In order to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section 73 or section 74 of KGST Act in respect of the same. Besides, no penal action under the provisions of section 73 or section 74 is required to be taken against 'A' in respect of the said transaction. The registered person 'A' shall, however, be liable for penal action under section 122 (i) (ii) of the KGST Act for issuing tax invoices without actual supply of goods or services or both. 2. A registered person A has issued tax invoice to another registered person B without any underlying supply of goods or services or both. 'B' avails input tax credit on the basis of the said tax invoice. B further issues invoice along with underlying supply of goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said tax invoice and further passes on the said input tax credit to another registered person 'C' by issuing invoices without underlying supply of goods or services or both. Whether 'B' will be liable for the demand and recovery and penal action, under the provisions of section 73 or section 74 or any other provisions of the KGST Act. In this case, the input tax credit availed by `B' in his electronic credit ledger on the basis of tax invoice issued by 'A', without actual receipt of goods or services or both, has been utilized by 'B' for passing on of input tax credit by issuing tax invoice to 'C' without any underlying supply of goods or services or both. As there was no supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n against a person will depend upon the specific facts and circumstances of the case which may involve complex mixture of above scenarios or even may not be covered by any of the above scenarios. Any person who has retained the benefit of transactions specified under sub-section (1A) of section 122 of KGST Act, and at whose instance such transactions are conducted, shall also be liable for penal action under the provisions of the said sub-section. It may also be noted that in such cases of wrongful/ fraudulent availment or utilization of input tax credit, or in cases of issuance of invoices without supply of goods or services or both, leading to wrongful availment or utilization of input tax credit or refund of tax, provisions of section 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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