Section 122(1A) of the CGST Act penalises the beneficiary of a fraudulent transaction, even when someone else issued the fake invoice or wrongly availed the credit. This is the vendor-KYC, documentation, and ITC-reconciliation discipline that protects a genuine business from being caught in someone else's fraud chain.
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01 / 05
Vendor onboarding and KYC
- Verify every vendor's GSTIN status (active, not cancelled or suspended) on the GST portal before onboarding, not just at the time of the first invoice.
- Cross-check the vendor's GSTR-1 and GSTR-3B filing history for consistency with the turnover they're claiming.
- Verify the vendor's registered address independently for high-value vendors — a site visit or third-party verification, not just the address on the invoice.
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Transaction documentation
- Maintain purchase orders, delivery challans, e-way bills, and goods-receipt notes for every transaction, not just the tax invoice.
- Match invoice details against the e-way bill and transport documents — vehicle number, distance, and consignor/consignee details should agree.
- Retain proof that goods or services actually moved: weighbridge slips, goods-receipt notes, or service-completion certificates.
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03 / 05
ITC eligibility checks
- Reconcile every ITC claim against GSTR-2B before filing GSTR-3B, every month, without exception.
- Don't claim ITC on an invoice until the corresponding supply actually appears in the vendor's GSTR-1 and flows through to your GSTR-2B.
- Maintain a vendor-wise ITC reconciliation log showing the GSTR-2B match status for every claim, so a gap is visible immediately, not discovered during an audit.
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Ongoing monitoring
- Re-verify active vendors' GSTIN status on a set cadence (quarterly at minimum), not just once at onboarding.
- Set up an alert for any vendor whose registration is cancelled or suspended.
- Stop further transactions, and claim no further ITC, from a vendor the moment a cancellation or suspension is flagged.
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Response readiness
- Keep a ready documentation file per vendor: KYC records, purchase order, invoice, e-way bill, goods-receipt note, payment proof, and GSTR-2B reconciliation — assembled in advance, not under notice-response deadline pressure.
- Designate one internal owner accountable for GST notice response within the statutory timeline.
- Route any Section 122(1A) show-cause notice through a CA or legal review before a response is filed — this is not a notice to self-respond to without one.