Goods Supplied Under Fraudulent Order Without Payment: AAR Rules GST Still Applicable on Issued Invoices [Read Order]
The Gujarat AAR ruled that GST is payable on goods supplied under a fraudulent order, even if no payment is received, as such supply falls within the scope of Section 7 of the CGST Act
![Goods Supplied Under Fraudulent Order Without Payment: AAR Rules GST Still Applicable on Issued Invoices [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/04/GST-liability-AAR-Rules-GST-Payment-Taxscan.jpg "Goods Supplied Under Fraudulent Order Without Payment: AAR Rules GST Still Applicable on Issued Invoices [Read Order]")
The Gujarat Authority for Advance Ruling ( AAR ) held that Goods and Services Tax ( GST ) is payable on goods supplied under a fraudulent order, even if no payment is received from the recipient. Acube Engitech Company, a Rajkot-based manufacturer of submersible pumps, sought clarity on whether GST liability arises on goods supplied when the order was placed fraudulently and without...
The Gujarat Authority for Advance Ruling ( AAR ) held that Goods and Services Tax ( GST ) is payable on goods supplied under a fraudulent order, even if no payment is received from the recipient.
Acube Engitech Company, a Rajkot-based manufacturer of submersible pumps, sought clarity on whether GST liability arises on goods supplied when the order was placed fraudulently and without any consideration being received.
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The applicant explained that they were duped by a group that impersonated the Matak Autonomous Council (Assam) and placed a fake order using forged documents. Believing the order to be genuine, the applicant dispatched several consignments between June and July 2023 and issued valid tax invoices. Only after the goods were delivered, the applicant knew about the fraud, and the applicant never received payment for the supplies.
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The applicant argued that since the transaction lacked valid consent and consideration, it should not be treated as a supply under GST law. They also referred to the principles of the Indian Contract Act and a Supreme Court ruling in Devas Multimedia Pvt. Ltd. v. Antrix Corporation Ltd. to contend that a contract tainted by fraud is void and so should not trigger a tax liability.
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The bench comprising Meena (SGST Member) and M.R. Shukla (CGST Member) observed that under the GST framework, liability arises on the act of “supply” as defined in Section 7 of the CGST Act, 2017, which includes sale, transfer, or any form of delivery for consideration in the course of business.
The AAR explained that the term “supply” is broader than “sale” under the Sale of Goods Act and is triggered by the issuance of an invoice or the receipt of payment, whichever occurs earlier, as per Section 12 of the CGST Act.
The AAR observed that valid tax invoices were issued and goods were dispatched and received at the destination. Despite the transaction being fraudulent in nature, the actual movement of goods and the issuance of invoices confirmed that a supply had taken place under the GST law. The AAR clarified that fraud is relevant under contract law but does not exempt the transaction from being considered a taxable supply under GST.
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The AAR ruled that the applicant is liable to pay GST on the goods supplied under the fraudulent order, as the transaction qualifies as a “supply” under Section 7 of the CGST Act and Section 20 of the IGST Act, read with Section 12 governing time of supply.
To Read the full text of the Order CLICK HERE
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