Delhi HC Imposes Fine on Firm Due to Fake GST ITC Claim Using Fake Invoices

The Delhi High Court has levied a penalty on a private company for illegally claiming the wrongly claimed input tax credit (ITC). The court warned that such fraud could cause harm to the GST credit system.

“This court takes note, with some consternation, that such large-scale fraudulent availment of ITC may, if left unchecked, lead to severe damage to the GST framework itself,” a bench of Justices Prathiba M. Singh and Rajneesh Kumar Gupta said.

ITC available under the GST system allows businesses to reduce the GST they pay on purchases. However, some companies are misusing this mechanism. The high court noted that many companies are creating fake invoices to the ITC to avoid paying full GST. When these companies are caught, they rush to court, hoping to get relief from the penalties.

The court observed that not only the GST ITC mechanism but also the writ jurisdiction is being misused by the businesses.

In the present case, over 500 firms, including the fined company, were involved in fraud amounting to more than Rs 56 crore. Therefore, the court imposed costs on the firm.