Right from the beginning, I have been highlighting the fact that GST management is simply like managing a passbook & therefore, there should not be a serious problem in managing a robust system, which delivers on all counts. The point is that the task is simple because it simply involves management of legitimate debit & credits. However, enormity of the task is a small challenge to manage. We have been running the banks for long through the systems approach therefore with that experience in hindsight, it should not be a serious problem. However, if honesty is missing in intention, then the system is doomed to be a failure. This is despite the fact that the government itself had the experience of running the VAT system, which was running on the same line. If there was proper application of mind, the results would have been far better & the system would be more user friendly. As a matter of fact, the deliberate mistakes are staring in the face, which were mindlessly included to show better tax collections. The department was so lopsided in approach that they introduced prior import condition in respect of the use of Advance Authorisations, without realizing the implications. The government was compelled to give up this idiocy but then they have introduced another one i. e. not permitting the exporter to export under refund of GST procedure while using the Advance Authorisations but compelled the exporter to use the LUT instead. This simply subjects the exporter to an unnecessary cost in terms of the deployment of extra working capital & cost attributable to it, which has no place in the face of stiff international competition. It is pertinent to point out here that there is no one is to one correspondence between credit & utilization thereof therefore imposing arbitrary restrictions is foolhardy (because as per the mandate of the Parliament, competitiveness of export is of prime significance because exports are a priority). It is this procedure, which needs to be completely over hauled & automated so that the system calculates the refund automatically in respect of each & every exporter & inform the entitlement value so that the exporter can exercise the option of refund at his will. There are no ifs & buts acceptable & it is the bounden duty of the CBIC to ensure that. The automation of the system removes any chances of corruption of whatsoever nature & therefore essential.
Now we deal with the main issue of facilitation of refunds to the exporters. It is simply an idiocy not to allow exports under refund procedure in case of the Advance Authorisations because once the credit is available with the exporter, the government cannot simply put arbitrary restrictions on the use of it & crack a poor joke (this is a larger issue & I will deal with it in a separate article). This is convenient to the exporter because then the exporter gets the refund by just completing the exports by way of credit in their account. Off course, there were many glitches but then it has normalized as of late. I am a votary of this system because it is beyond the mischief of the corrupt mind. The credit exists as per law & the same is utilized for the payment of GST in respect of invoice issued for the clearance of the export & the system then processes the refund subject to export being completed. The readers will understand that this process leaves no room for any dirty manifestation or whimsicality of the officials in position & therefore as clean as possible. Therefore, what did the officials do is played another dirty trick & stopped its use in combination with Advance Authorisation & Duty Drawback. However, the fact is that the same ease of refund should operate in case of refund if exports are conducted under the LUT but that is not to be because the bureaucracy is not willing to let forego their powers, which they exercise over the assesses. Any person with a little common sense should ask the basic question that why the systems are not designed & operated in a manner that they will facilitate the assesses & why arbitrariness & stupidity abounds & the very basics ignored. Why the beneficiary is treated as unpaid servant of the government to do everything? Why the officials, who are paid handsome salaries not supposed to be doing things in a time bound, transparent & result oriented manner? Why the taxpayer is not center stage & systems oriented in a manner that will ensure that all decisions are taken in a manner, which will take care of the assesses first rather than serve only the vested interest of the bureaucracy. Why should the bureaucracy be so abusive in mindset & far worse in implementation?
Now, please pay attention to these basics. Every GST registrant is required to file a Return. Per se, the return should be designed in a manner that it collects all the information so that all the basic tasks of running the reports should be performed by the system including the refund to the exporter. The reason being that taxes & duties cannot be exported & refunds are in proportion of exports to the total turnover. The CBIC cannot only worry about the collections but be more aware & concerned about refunding the money, which does not belong to the department. Failing this, there is something seriously wrong with the returns & that should not be the case & therefore untenable. Now, taking it further, the details about the sales are a finite mathematical figure whether it is domestic sales or export sales. Therefore, there is no scope for any discrepancy in terms of arriving at the sales. The same should apply to the services so that transparency prevails & there is no ambiguity & scope for any manipulative interpretation. Even if the CBIC wants certain compliances before they can be counted in turnover then too that figure should clearly appear in the return or update itself on real-time basis. Now, let us see the credits, which enter the system through the purchases. Once again, there is no scope for ambiguity because again that is a finite mathematical figure whether it is domestic or import purchases. Now, these credit figures stand verified through the operating system in itself therefore, there is no case of anything going wrong. Now, we move further & then see the process of exports. Once again everything happens under the supervision of the Customs officials & stands authenticated before the Let export Order is allowed by the Customs department & then the Export General Manifest is filed & export completed. Therefore, once again there is no scope for any manipulation under any circumstances in a systems driven approach. The CBIC authorities will now observe that once this position appears to be correct then there is no scope that the exporter should be compelled to file a separate refund application & do the calculations all over again. The truth is contrary & I am disgusted to note that the exporter is not only compelled to make an application but do the calculations & compilations all over again & forewarned to be careful otherwise the application would be rejected & the process of filing the refund application to be repeated after rectifying the discrepancies. My inquisitive mind tells me that if the returns are properly designed & operated then why & how can there be a cause for any discrepancy because all the verified figures should come from the return itself? That is not the case then why not those glitches can be removed & the exporters facilitated. Is it not the bounden duty of the CBIC to implement this? If they don’t do it then are they not cheating the exporters by just harassing them to file an application after recalculations all over again? The incontrovertible truth is that export & domestic sales, Input Tax Credit are finite mathematical figures & refund on exports is a proportion of the total turnover then why cannot the refunds under LUT be automated so that particularly, the small & medium scale exporters are facilitated. Why the CBIC is not interested in simplifications, which will deliver results automatically & seamlessly.
I was doing a refund application on the system & all this flashed in my mind & it did not require even an in-depth analysis therefore it should be within the realm of thought of the CBIC also but then there is no will to facilitate is absolutely clear. I understand that Circular No. 125/44/2019-GST dtd. 18.11.2019 is relevant as it clarified very many issues & settled the same but then it is no good as evident. The circular says that the exporter has to file the refund applications with statements/declarations/undertakings which are part of FORM GST RFD-01. The circular says that FORM GSTR-2A for the relevant period needs to be uploaded. I am surprised that why should this be the case when the same is System Generated document from the GST website. Further, it says, Annexure-B has to be filed, which again is a copy of GSTR-2A with additional columns. In the Annexure B, you have to say whether the credit is eligible for the refund & exclude the credit of the capital goods. Once again in the Value-added taxation regime, this distinction of availing the credit & not permitting refund thereof in respect of Capital goods is impermissible on the basic principles of taxation because it is simply arbitrary in nature. There is another one, which is denied without any valid reason & that is credit arising out of Reverse Charge Mechanism (RCM) & this is done silently i. e. without any express authority in the law therefore simply dadagiri prevails. The RCM credit does not reflect in the in GSTR 2A & the credit cannot exceed the amount shown in GSTR 2A therefore this dispensation is the root cause of the dadagiri. The point of law is simple that once the GST credit is available then you cannot arbitrarily stop refund thereof in proportion of the export turnover but then the CBIC thinks that they are beyond the ambit of the law because law is not a rational code thus paves for whimsicality & manipulation. A person with even common sense will realize that if the assessee exports 100 % of the production, then he will remain saddled with increasing cost of accumulation of credits on account of capital goods & RCM & this is unacceptable. Further, in the statement Annexure B HAS/SAC has to be mentioned. Think of it, how idiotic is the implementation of the solution? The GSTR 2A format (which has a basic error) is not to be rectified but the exporter should work for free & incorporate the HAS/SAC code in the Annexure B. This mean attitude is not only unacceptable but repulsive because the error is made by the officials & the exporter should bear the brunt of it for no fault of theirs. Thinking more rationally, how on earth does the official know whether the HAS/SAC code is properly incorporated? These short cuts point to adhocism & no proper application of mind & approach. Next in line is that the exporter should upload the invoices in respect of which the credit is not matched through GSTR 2A. Even God would not understand that how uploading of the missing invoice will help the department? However, to give credit, where it is due, there is only one logical provision which is displayed on the screen is in respect of the credit amount at different points & lowest of them to be allowed as refund. However, the subsequent directive about debit to be carried out before uploading the application is perplexing because there is no such provision in the system for raising debit for the purpose of refund & I discover through enquiry that it happens automatically. There should be no confusion about the taxable value when the same is given in the Invoice issued under Rule 46 of the CGST Rules but creating complications is the favourite game of the officials therefore once again the confusion is introduced by saying that the value given in the Shipping Bill & the Invoice should be compared & the lower of the two to be taken into accout for refund without specifying which value in the Shipping Bill is being spoken about. This only shows that the law makers in themselves are utterly confused because in case of C & F as well as CIF shipments, FOB value of shipping bill will be always lower than the GST Invoice value but then can the FOB value act as a limitation. The confusion does not end here because there is one more rule governing the value limitation & that is that the FOB value of exports should not exceed 150% of the taxable value of the like goods sold in the market by the manufacturer himself or any other manufacturer. Once again, if you apply your mind then you have no solution or clue about how to know the value of any other manufacturer. Do I need to hire a spy for this purpose? I consider this again to be idiotic because the shipping bill carries the PMV i. e. Present Market Value & once this stand approved by the Customs department by allowing the Let Export Order then why the exporter should be once again burdened while seeking the refund. The system should pick up the value by itself as given in the Shipping Bill & the exporter cannot be burdened any further. The next issue is about the calculating the net ITC & this means that refund claims under Sub-rules (4A) or (4B) or both should be deducted from the total ITC amount. Once again, why this is not possible through the system is difficult to comprehend. The department has to just modify the returns or software if required. Finally, even Turnover is also not beyond re-computation because Adjusted Total Turnover has to be calculated. Once again, there is no rationale. It is difficult to understand why this should be acceptable to the CBIC? Last but not the least important is the fact that the LUT Number has to be incorporated but then why it cannot be done through the systems approach is difficult to fathom. Why these complications exist in the system is only for the purpose of harassment & delaying the refunds of the exporters. There is no other purpose served by these inadequacies in the system. They have messed up everything to the maximum extent possible & I prefer to call spade a spade. The mess tells you three things: 1. Absence of clarity at the level of the law makers 2. No willingness to serve the interest of the exporters & 3. Harassing the exporters to no end so that they are compelled to deploy consultants for getting their own legitimate refunds.
The readers may please note is that if the exports are conducted under the IGST refund procedure then how these idiotic cheques of adjusted turnover & Net ITC taken care off? If that is not a problem there then why & how it can be introduced as a limitation in respect of the exports under LUT arbitrarily. The IGST is paid on the taxable value in the Invoice & that is the amount what is refunded therefore once again, why should that not be the case in case of exports under LUT. Why the CBIC indulging into such idiocies & to whose benefit?
It is important for CBIC to comprehend that refund is legitimate in respect of exports & permitted under the aegis of the WTO regime therefore the CBIC is duty bound to carry out the refunds in an exporter friendly manner. This is of significance to the Small & Medium scale Exporters in particular because the refunds will reduce the Working Capital outlay & reduce the cost of capital for them & lend them a helping hand in being competitive.
Finally, the circular has a very strange condition that in case of a deficiency, the refund application will be rejected & the exporter has to file a fresh refund application after rectification & that also should be within 2 years of the relevant date in terms of Sub-section (14) of Section 54 of the CGST Act. Anyhow, the legal position as on date is that once the initial application is filed within the stipulated time period then there cannot be any subsequent rejection on limitation in any case.
The CBIC is doing a good job of detecting the frauds in the system through data analysis then why should they fail in discharging their bounden duty in respect of facilitating refunds. The software should be able to perform the functions & it is high time that the size of the government is reduced drastically so that the administrative costs of the government are brought down drastically. Why do you need an Inspector/Superintendent/Assistant Commissioner/Deputy Commissioner/Joint Commissioner/Additional Commissioner/Commissioner/Chief Commissioner/Principal Chief commissioner/ CBIC Board Member? The 10 tiers system is a complete waste of tax payers’ money because once the robust software does the job where is the scope for these white elephants in the system. You simply need call center capability employees who can spot the wrongs in the system because they are more adept & the old hands are not even computer savvy. The CBIC Board has think rationally to provide the best of service to the taxpayers for which they are put in place & not making things complicated enough so that even the law makers fail to understand that what is the exact law? If this is not done then it only shows that we believe in lip service & not think beyond that & that is highly unacceptable.
The readers are also welcome to take up the issue further & suggest more facilitation measures & hold the CBIC responsible. The exporters need to be treated with dignity because they are serving the nation. This is one engine of growth, which has helped the economy chug along! Don’t make the mistake of treating the exporters shabbily. I am happy that now the exports are on merit & not being subsidized by this poor country through MEIS like entitlements. The exports need only their vested rights to be taken care of in the right perspective & nothing beyond that. I will respond to whatever comes my way in terms of suggestions.
(Author can be reached at firstname.lastname@example.org)
Disclaimer: The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up. The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.
How can the CBIC defy the basic principle of GST i.e. to ameliorate the cascading effect of GST paid at the earlier stages.
How can the CBIC defy the basic principle of GST i.e. there is no 1:1 correspondence between the credit availed under GST & utilization thereof.
The last footprint of idiocy is that the credit is due to the exporter on the capital goods & under Reverse Charge mechanism but not good for calculating & getting the refund. Now, if I am exporting 99.80% of the goods produced, do I need to bear the burden of CBIC idiocy perennially. Can CBIC be allowed to continue with such poor jokes GST credit is valid but sorry not valid for refund even if law is not a rational code. you don’t need International competition to destroy the exporter, CBIC is there to do that!
I have come across another idiocy operating in the software system for delaying the refunds of the exporters by the Indian bureaucracy. I am simply aghast at the games, the bureaucrats play to cheat the exporters & add significantly to the woes of the Small & Medium enterprises. The bureaucracy hold up the refunds saying that PFMS validation needs to be carried out. The point of concern is that why only those account numbers of the exporters do not appear on the IGST website, which are valid for the refund & validated by the PFMS authorities. Failing this, why this validation exercise is not conducted through the AI without the human intervention even if the last minute check needs to be essentially performed. Failing all this, please understand that common sense tells you that why will the exporter or IGST holder specify a wrong account number for the refund & jeopardize their own refund?
The CBIC Chairman or any of the members failed to respond even after sending the article to their personal attention then the only conclusion is that we simply believe in lip service & propagating, protecting & perpetuating the inefficiency & systemic corruption but don’t believe in creating the enabling environment, which will help business flourish & raise the GDP & tax collections.
The conduct of the CBIC is shameful & disgusting. Why cant they say why what is specified as the prime responsibility of the CBIC cannot be implemented?