How to Verify Fake GST Invoices: A Quick Guide

The government of India introduced GST (goods and services tax) in July 2017, mainly to simplify the tax structure and replace the old VAT (value-added tax) system levied on goods and services. Since its implementation, many experts believe that the country's economic activities have improved significantly.

On the other hand, over the years, the number of cases reported about fake GST invoices has risen tremendously. And, in the purview of such a rising GST invoice scam, the issue has become a matter of serious concern for business owners. In most of the cases reported, people providing fake GST invoices take undue advantage of the input tax credit and indulge in other fraud activities like money laundering and tax evasion.

As a consumer, you may unwittingly get involved in a fake GST invoice scam. Therefore, it is paramount that you learn how to identify fake GST invoices. But let us first know what a GST invoice and a fake GST invoice are.

What is a GST invoice?

Typically, a GST invoice is generated by the supplier or seller of goods and services and issued to the buyer. It is essentially a bill that has all the necessary information, including identification of the buyer and the seller, name of the product/service, quantity of goods/services, date of purchase/sale, discount (if any) etc.

What is a fake GST invoice?

According to the Union Ministry of Finance, a fake GST invoice is generated even when the seller has not actually made any sale or offered a service. Typically, fake GST bills are generated mainly to evade paying GST, converting income tax credit into cash and money laundering.

GST invoice format

A GST invoice has a specific format, and it must have certain mandatory fields, which are as follows:

• Name and address of the supplier/seller and their GSTIN (Goods and Services Tax Identification Number)
• 16-character or less tax invoice number. It is important to note here that the number must be generated later, and it must be unique to that financial year
• Date of issuing the invoice
• Type of invoice
• GSTIN of the customer (if they are registered)
• Shipping and billing address
• HSN (Harmonised System of Nomenclature) code. It is a code that identifies the nature of the goods, and it is recognised globally
• The number of units or quantity of the items supplied/sold
• Total value of the items
• Quantity and units
• Taxable value after discount deduction (if any)
• The applicable taxes – GST and Cess
• Signature of the supplier/seller or any of their authorised representative

Identifying a fake GST invoice

All GST invoices should be drafted in the above format only and contain all the details. The format is a great indicator of the legitimacy of the invoice. As a business owner or a consumer, you may get a fake GST invoice, and it is important to know the key factors that can help you identify a fake GST bill.

• Registered taxpayer

  The seller/supplier must be registered, and the invoice must have GSTIN. With GST registration, the seller cannot charge GST from the customer. As per the government regulations, a business owner with an annual turnover of over INR 20 Lakhs, a person dealing with inter-state supply and a person owning an e-commerce business must be registered under GST.

  
  

• GSTIN

  It is paramount that the GST invoice has a unique GSTIN. This is one of the critical indicators of a legal GST bill. If the invoice does not have this unique code, you can be certain that it is fake. Also, the GSTIN code must be mentioned in the correct format. It is a 15-digit code, wherein the first two characters represent the state code, and the next 10 characters represent the business's PAN (permanent account number). The 13^th character represents the entities of the same PAN in the state. The 14^th character is the letter ‘Z’ by default. The 15^th character can be a letter or number, which is used by the GST regulators for internal checks.

  
  

• Correct GST rates

  As a customer trying to verify fake GST invoices, you must check if the GST rates are mentioned correctly by visiting the official GST portal or by downloading the GST rate finder application. Also, it must have a detailed break-up of the CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax) rates.

  
  

• HSN and SAC code

  Another important thing to check while verifying fake GST is the HSN or the SAC code. The real GST invoice would have this clearly mentioned. HSN is the universal coding system that identifies the nature of goods. The SAC (Services Accounting Code) is assigned to a particular service.

  
  

• Signature of the supplier

  As per government rules, all GST invoices must be compulsorily signed by the supplier or any representative authorised by the seller. So, as a consumer, if you have any doubts regarding the authenticity of the GST invoice, one of the ways to verify it is to check the supplier's signature. It must match the signature available with the GST authorities.

Conclusion

The GST invoice is an important financial tool that helps prevent instances of tax evasion and protects consumers' interests. The government of India is working relentlessly to implement new ways of tackling money laundering scams and tax evasion cases due to fake GST invoices. One such excellent initiative in this direction is the introduction of SOPs (Standard Operating Procedures) to identify suspicious entities during the preliminary stages.

As a consumer, you must take the necessary steps and have the right information to verify the fake GST invoice and protect yourself from becoming a soft victim of a scam.