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.
Shareen Gupta, a partner at JSA Advocates & Solicitors, emphasised the reality for suppliers in such situations: “Liability to pay GST triggers upon the supply of taxable goods or services. The law does not prescribe any legal recourse in a situation where goods have been supplied to a fraudulent buyer. Therefore, no waiver from GST payment can be claimed by the supplier, where consideration, including GST, is not recovered from the customer,” Gupta said.
Acube lingitech had approached GAAR seeking a ruling on whether the goods they supplied due to the fraudulent order, and for which they received no payment, constituted a supply under Section 2I of the IGST Act. In their defence, they cited the Supreme Court’s judgement in the Devas Multimedia P Ltd v/s Antrix Corporation Ltd case, where the fraudulent incorporation of Devas Multimedia led to its winding up, preventing any benefits from the tainted agreement.
However, after considering the facts and arguments, GAAR acknowledged the undisputed supply and delivery of goods. Despite the fraudulent nature of the order, GAAR rejected Acube lingitech’s argument that this negated the supply. The authority reasoned, “An element of fraud may vitiate a contract, but how it would enable the applicant to move out of the ambit of the term supply as defined under Section 7 is neither explained nor forthcoming. We, therefore, reject this averment made by the applicant,” GAAR said, denying the company’s application.
Published on May 13, 2025
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.
Shareen Gupta, a partner at JSA Advocates & Solicitors, emphasised the reality for suppliers in such situations: “Liability to pay GST triggers upon the supply of taxable goods or services. The law does not prescribe any legal recourse in a situation where goods have been supplied to a fraudulent buyer. Therefore, no waiver from GST payment can be claimed by the supplier, where consideration, including GST, is not recovered from the customer,” Gupta said.
Acube lingitech had approached GAAR seeking a ruling on whether the goods they supplied due to the fraudulent order, and for which they received no payment, constituted a supply under Section 2I of the IGST Act. In their defence, they cited the Supreme Court’s judgement in the Devas Multimedia P Ltd v/s Antrix Corporation Ltd case, where the fraudulent incorporation of Devas Multimedia led to its winding up, preventing any benefits from the tainted agreement.
However, after considering the facts and arguments, GAAR acknowledged the undisputed supply and delivery of goods. Despite the fraudulent nature of the order, GAAR rejected Acube lingitech’s argument that this negated the supply. The authority reasoned, “An element of fraud may vitiate a contract, but how it would enable the applicant to move out of the ambit of the term supply as defined under Section 7 is neither explained nor forthcoming. We, therefore, reject this averment made by the applicant,” GAAR said, denying the company’s application.
Published on May 13, 2025
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The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making
The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making it look like readable English. Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for ‘lorem ipsum’ will uncover many web sites still in their infancy.
It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution
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