The government stated on 20th June that it has identified 5,106 “risky exporters” who have claimed GST refunds based on bogus invoices, and their claims would be manually checked before issuing refunds.
The Central Board of Indirect Taxes and Customs (CBIC), in a statement, also assured genuine exporters that their refund claims would be processed in an automated environment and issued in a timely manner.
The CBIC had issued an instruction to its Customs and GST formations to verify the correct availment of input tax credit (ITC) by few exporters who are perceived as “risky” on the basis of pre-defined risk parameters. CBIC stated that even for the risky exporters, the exports are allowed immediately. However, the refund would be released after verification of ITC within a maximum of 30 days.
The introduction of manual checks in IGST refunds is aimed at preventing unscrupulous exporters from defrauding the exchequer. It said that in two days, June 17 and 18, only 1,436 shipping bills filed by total 925 exporters have been interdicted. CBIC stated that the intervention is negligible considering that about 20,000 shipping bills are filed by roughly 9,000 exporters on a daily basis,
In the instruction issued on Monday, the CBIC had asked the director-general (systems) to identify “risky exporters” and inform the respective Chief Commissioner of Central Tax about the past IGST refunds granted to such risky exporters (along with details of bank accounts in which such refund has been disbursed).Risk Management Centre for Customs (RMCC) shall insert alerts for all such risky exporters and make 100 per cent examination mandatory of export consignments relating to those risky exporters. Also, alert shall be placed to suspend IGST refunds in such cases.
Exporters can claim IGST refunds on exports in two ways, either on the basis of issuance of a bond/letter of undertaking at the time of exports and claiming a refund of accumulated ITC, or paying IGST in cash at the time of exports and claiming refunds thereafter.
It had come to the notice of taxmen that certain exporters availed ITC on the basis of ineligible documents or fraudulently and utilised that credit for payment of IGST on goods exported out of India. According to CBIC, it had also been observed in several cases that there was a huge variation between the FOB (freight on board) value declared in the shipping bill and the taxable value declared in GST return apparently to effect higher IGST pay out leading to encashment of credit.
As per the instruction, the GST officers have been mandated to report to the Chief Commissioner of Central Tax within 30 days specifying whether the amount of IGST paid and claimed/sanctioned as refund was in accordance with the law or not.
The Chief Commissioner of Central Tax will then share the report with customs port within five working days. In cases where no malpractices are detected and the ITC availed by the exporter was in accordance with the GST law, the customs officer at the port of export shall proceed to process the IGST refund.
For cases where malpractices are reported on verification and it is found that the exporter has availed ITC fraudulently or on the basis of ineligible documents and utilised the said ITC for payment of IGST claimed as refund, the customs officer will not process the refund claim.
