Supplier who falls victim to fraudulent order also liable to pay GST: Gujarat Authority for Advance Ruling

In a potentially significant ruling, the Gujarat Authority for Advance Ruling (GAAR) has determined that even a supplier who falls victim to a fraudulent order is liable to pay GST on the goods supplied regardless of whether they receive any payment. Experts suggest that this decision leaves businesses in such circumstances without legal recourse, potentially setting a new precedent that aligns with tax principles applicable to illegal income under Income Tax and Customs laws.

GAAR’s ruling came in response to an application from Rajkot-based Acube lingitech Company, which was duped by individuals, who created a fake purchase order appearing to be from the Matak Autonomous Council in Assam. 

GAAR clarified its stance, stating, “The goods supplied by the applicant will be considered as supply of goods in terms of Section 20 of the IGST Act, 2017, read with Section 12 and 7 of the CGST Act, 2017.” These sections of the GST law define the concept and timing of a supply.