Turns out, even if you’ve been conned, the taxman won’t cut you any slack. In the eyes of the Gujarat GST Authority for Advance Ruling (AAR), getting duped doesn’t mean you’re off the hook—especially when it comes to paying your GST dues.
In a recent ruling, the AAR held that goods supplied under fraudulent circumstances are still subject to taxation. Why? Because GST, it said with zero irony, is charged on “supply”—not necessarily on “sale” or “payment received.” In other words: you got tricked? That’s unfortunate. But did you deliver goods? Well then, pay up.
The ruling came after Acube Engitech Company, a submersible pump manufacturer based in Rajkot, approached the authority for clarification. In 2023, the company shipped 5,660 pumps worth Rs 14.51 crore to the Matak Autonomous Council in Assam—only to later find out that the entire order was based on forged documents.
While Acube promptly filed a police complaint, it was left wondering: if no real sale happened, is GST still applicable?
Despite filing a police complaint, the company had GST obligations. According to a report, the firm requested an advance ruling regarding whether goods supplied under fraudulent circumstances qualify as a supply under section 21 of the Integrated Goods & Services Tax Act.
Citing Article 366 (12A) of the Constitution of India, the authority clarified: “Under the GST Act, 2017, the levy is on supply of goods and services or both, except taxes on supply of alcoholic liquor for human consumption.” (So basically, if you’re shipping liquor, you’re off the GST hook—but not if you’re sending water pumps to a scammer.)
According to the order, the authority’s order noted that the company made supplies according to section 20 of the IGST Act, read with section 12 of the CGST Act. “Under the GST Act, 2017, the levy is on supply of goods and services or both, except taxes on supply of alcoholic liquor for human consumption in terms of Article 366 (12A) of the Constitution of India,” the authority said in the order. It was also clarified that the word used is “supply and not sale”.
The ruling dismissed the company’s contention that fraudulent orders do not constitute supply. “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 of the Act,” the authority said.
In short: the goods moved, and so must your taxes—scam or no scam.
