Circular, 2022

Text

Reproduced from the document India Code holds for this instrument. The Gazette prints Hindi and English side by side and this is the English; the Department's own PDF remains the authority.

Office of the Commissioner, | State Tax, Uttar Pradesh, (GST Section) .

Letter No. GST/2022-23/ <3 /State Tax AJ Zonal Additional Commissioner, Grade -1, Additional Commissioner, Grade -2, (S.LB.) State Tax, Uttar Pradesh. .

Subject: Clarification on various issues relating to applicability of demand and penalty provisions under the Uttar Pradesh’ Goods and Services Tax Act, 2017 in respect 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 Uttar Pradesh Goods and Services Tax Act, 2017 (hereinafter referred to as “UPSGST Act”), in respect of such transactions involving fake invoicés. In order to clarify. these i issues and to ensure uniformity in the implementation ‘of the provisions of law across the field formations, the Commissioner, in exercise of its powers conferred by section 168 of the UPSGST Act, hereby clarifies the issues detailed hereunder.

SL. No. a - Issues __ Clarification 1, In case where a registered person Since there is only been an issuance of “A” has issued tax invoice to another | tax invoice by the registered person ‘A registered person “B” without: any | to registered person. ‘B’ without the underlying supply of goods “or underlying supply of goods or services services -or. both, whether such | or both, therefore, such an activity does transaction will be covered as | not satisfy the criteria of “supply”, as “supply” under séction 7.of UPSGST defined under section 7 of the UPSGST Act and whether any demand and | Act. As there is no supply by ‘A’ to ‘B’ recovery can be made from ‘A’: in | in respect of such tax invoice in terms of respect of the said transaction under | the provisions of section 7 of UPSGST the -provisions of section 73 ‘or | Act; no tax liability arises against ‘A’ for section 74 of UPSGST Act. the said transaction, and accordingly, no Also, whether any penal action can be taken against registered -persori ‘A’ in such cases. .

demand and recovery is required to be made against ‘A’ under the provisions of section 73 or section 74 of UPSGST 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 The “registered person’ ‘A’ shall, however, be liable for penal action under section 122 (1)(ii) of the UPSGST Act for. issuing. tax. invoices without actual supply of goods or services or both.

A Tegistered 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 goods. or services or both ‘to his buyers and utilizes ITC. availed on the basis of the above mentioned invoices issued by ‘A’, . for payment of his. tax liability in - “respect of his - said outward supplies. Whether ‘B’ will be. liable. for the. demand and recovery. of ‘the said ITC, along with penal action, under the provisions of section 73, or section 74 or any other provisions of the UPSGST Act.

Further,’ Since the registered person ‘B’ has availed and utilized fraudulent ITC on the basis of the said tax invoice, without receiving the goods: or services or both, in contravention of the provisions of section 16(2)(b) of UPSGST Act, he shall be liable for the: demand and recovery of the said ITC, along with penal action, under the provisions of section 74 of the UPSGST Act, along with applicable interest under provisions of section 50 of the said Act.

as per provisions: of section 73(13) of UPSGST Act, if penal action for fraudulent availment or utilization of ITC is taken against ‘B’ under section 74 of. UPSGST Act, no penalty for the same act, i.e. for the said fraudulent availment or utilization’ of ITC, can be imposed on ‘B? under any other provisions of UPSGST Act, including under section 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 and 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 Page 2 of 4 SS i J Lo 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 démand and recovery and penal action, under the provisions of section 73 or section 74 or any. other provisions of the UPSGST Act.

issuing tax invoice to ‘C’ without any underlying supply of goods or services ‘or both. As there was no supply of goods or services or both ‘by ‘B’ to ‘C’ in respect of the said transaction, no. tax was required to: be paid by “B’ in respect of the same. 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, is ineligible in terms of section 16 (2)(b). of the UPSGST Act. In this case, there. was no supply of goods or services or both by ‘B’ to: ‘C’ in respect of the said transaction and also no tax was required to be paid in respect of the said transaction. Therefore, in these specific cases, no demand and recovery of either input tax. credit wrongly/ fraudulently availed by ‘B’ in such case or tax liability in respect of the said outward transaction by ‘B’ to ‘C’ is required to be made from ‘B’ under the provisions of section 73 or section 74 of UPSGST Act.

However,. in such cases, ‘B’ shall be liable for penal action both under section 122(1){Gi) and section 122(1)(vii) of the UPSGST Act, for. issuing invoices without any actual supply of _ goods and/or services as also for taking/ utilizing input tax credit without actual receipt of goods and/or services.

2. The fundamental principles that have been delineated in the above scenarios may be adopted to decide the nature of demand and penal action to be taken against a person for such unscrupulous activity. Actual action to be taken 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 UPSGST 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 Page 3 of 4 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 132 of the UPSGST Act may also be invokable, subject to conditions specified therein, based on facts and circumstances of each case.

3, It is requested that suitable trade notices may be issued to publicize the contents of this Circular.

4, Difficulty, if any, in implementation of the. above instructions may please be brought to the notice of the Undersigned.

By Order, apa Commissioner, State Tax, Uttar Pradesh Copy To:

1. Joint Commissioner (I.T.), State Tax HQ, Lucknow for uploading the Circular in the yo | an State Tax HQ, Lucknow.

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Provisions this circular answers to

Read out of the instrument itself: an enabling provision is one it says it was made under, which is the power it rests on. The rest it names without resting on.

Other instruments under the same Act

All of the The Uttar Pradesh Goods and Services Tax Act, 2017