GST Bill Trading: What is It?
What is Bill Trading?#
Creating fake invoices to claim input tax credit without actual supply of goods or services.
How It Works#
- Company A sells to B without goods
- B sells to C without goods
- C claims ITC on fake purchase
- A collects tax but doesn't deposit
Patterns of Bill Trading#
Horizontal Trading#
- Same level businesses
- Multiple entities
- Round-tripping
Vertical Trading#
- Linked entities
- Buyer-seller relationship
- Transfer pricing manipulation
Why Businesses Do It#
- Claim ITC without payment
- Reduce tax liability
- Cash recovery from credit
How GST Catches It#
- GSTR-2A matching
- E-way bill analysis
- Supplier verification
- AI pattern detection
Consequences#
- Heavy penalties
- Interest on fake credit
- Prosecution
- Cancellation of registration
Prevention#
- Verify supplier credentials
- Physical verification of goods
- Bank payment proof
- Proper documentation
Conclusion#
Bill trading is illegal and leads to severe penalties.