The Authority For Advance Rulings, Gujarat in the case of M/s. Acube Engitech Company vide Case No. GUJ/GAAR/R/2025/03 (In Application No. Advance Ruling/SGST& CGST/2024/AR/05) dated 21.03.2025, has ruled GST is levied on the act of supply, and not on actual realization of payment. Even though the transaction was fraudulent, the goods were supplied, and invoices were raised. Hence, the conditions of supply under Section 7 are fulfilled. In such cases of fraud, the proper recourse is civil/criminal action against the fraudsters. The GST law does not absolve tax liability.

Facts of the Case: In this case, the Applicant is an manufacturer and supplier of liquid pumps. The Applicant was defrauded by individuals posing as representatives of the Matak Autonomous Council, who placed a fake order using forged documents. As a result of this, Goods were supplied, but no consideration was received.

The Applicant sought advance ruling as to whether the goods supplied by us [becoming victim of fraud without receiving consideration] could be considered as supply of goods under the provisions of section 21 under the IGST Act?

Issue: Whether the goods supplied (without receiving consideration due to fraud) amounts to “supply” under Section 21 of the IGST Act, 2017?

AAR Rulings : The AAR observed that the Applicant has incorrectly cited Section 21 of the IGST Act, as the same pertains to import of services, not to supply of goods. Therefore, the applicant’s reference to this section was misplaced and irrelevant for the case at hand.

Further, the AAR noted the applicable legal provisions of the CGST Act, 2017 i.e. Section 7 of the CGST Act defines “supply” which includes sale, transfer, barter, etc. for a consideration in the course or furtherance of business. Section 12 of the CGST Act determines the time of supply of goods. Section 20 of the IGST Act, provisions of the CGST Act (like Sections 7 and 12) apply to inter-State supplies.

The AAR stated that Supply is completed once goods are dispatch against the invoice. Therefore, the authority emphasized that issuance of invoice and dispatch of goods constitutes as a ‘valid supply’, and even if consideration is not received due to fraud, it doesn’t negate the fact of supply. Further, as per Section 12, the time of supply is the earlier of Date of invoice or Date of receipt of payment. Since invoice was issued but no payment was received, time of supply shall be date of invoice.

The applicant’s reliance on contractual principles under the Sale of Goods Act, 1930 and SC judgment in Devas Multimedia case was rejected, as GST law works on “supply” not “sale”, and fraud affecting contractual enforceability does not override GST liability once supply is effectuated.

The AAR ruled that fraud may give rise to civil/criminal remedies, but does not negate GST liability once a taxable supply has occurred. The applicant is liable to pay IGST on these supplies, despite not receiving consideration.