To my mind, one of the reasons for which people prefer to work for the government is that there is absolutely no responsibility & accountability in the system. You may commit blunders, which can bring down the nation as a whole but then nobody can pin you down for failures. One such case is that of refunds under the GST regime in respect of the exports in a timely manner as local taxes cannot be exported. Till December ’17, the exporters are not in a position to figure out how to get their July export related refunds. Neither the CBEC/GST authorities including the GST council nor the MoF seems to be least bothered to ensure that refunds are processed & credited to the exporter’s accounts. The first abject failure was to sideline the DGFT who is entrusted with the task to formulate the Export Import policy. The DGFT did not announce the impending policy changes under the GST regime but the GST council worked out the GST system in respect of exports. The DGFT was then left with no authority & purpose but compelled to amend the policy by way of simply a trade notice, & I have never witnessed this since 1983. This is despite the fact that exports are a priority & essential. The second failure was the GST regime in itself mandated payment of taxes & refund thereof thus burdening the exporters with high transaction costs. However, for obvious reasons duty exemption is the preferred way to promote exports all over the world. There is no need to collect those taxes, which do not belong to the government & refund the same because there is no free lunch. The GoI/DGFT was compelled to respect common sense & restore exemption up to 31.3.18. However, the authorities still have a strange idea of e wallet in their mind to grant credit & utilize the same for imports related to exports without giving the details of the scheme till date. Such idiocies can only be advanced in India despite the fact that duty exemption does the same thing without any hassles. The DES scheme has been in operation for more than a quarter of a century then too we fail to comprehend the benefits & implement the same with ease. Is it not idiotic to say that what works in respect of basic customs duty should not be apt for administering the IGST exemption! However, the point is that if everything becomes simple & effective then who will take care of the bureaucracy. Therefore, the law needs to be complicated & which traps the users. This has been the main reason that the complete GST refund process is completely botched up & it is quite clear that the exporters who made exports under LUT/Bond will continue to waste their time energy & resources for a long time. This is what is dished out in the name of reforms & the spineless businesses have no guts to stand up against the nuisance & call spade a spade.

As evident, the case in point is that of refund of terminal GST & ITC related to exports. Why the field formations cannot use the data filed by the exporter to get the refund of ITC at the very least on provisional basis. Each & every exporter has filed the GSTR 3B for the month of July, 2017 & discharged the GST liability on that basis. Therefore, even if the CBEC has been compelled to process the ITC refund of the exporters manually then too the GSTR 3B data can be put to use to refund 90% of the ITC credit straight away. It cannot be the case of the GST authority that GSTR 3B is only good for accepting the payment of GST but not good enough for the purpose of refund. Any person with little common sense will understand that the authorities cannot be whimsical in approach & accept the data appearing in GSTR 3B partially. Please note that the refund is provisional in any case & subject to verification before the balance 10% is released to the exporter after completion of the scrutiny. I don’t believe that the IIT/IIM graduates associated with the GST portal are not able to comprehend the needs of the exporters & implement this. Therefore, the moot question is that why there is no urgency shown in effecting the refunds. The exports constitute 40% of the economic activity of the total trade therefore if the exporters do not get their refunds in time then they are in serious trouble. This holding up of refunds has happened month after month for several months now. Why the GoI/GST officials are only bothered about the collections & let the exporters be killed. Therefore, to my mind, this is the first instance of deceitful conduct & idiocy where the authorities accept what suits their whims & fancy.

The exporter has then filed the GSTR 1 i.e. the details of the outward supplies including that of exports. Similarly, the suppliers of the exporter have filed the GSTR 1. Therefore, there is corroborative data in the system regarding the credit claimed by the exporter & the credit available to the exporter from the supplier. It is pertinent to note that this is the backbone of the systems oriented approach to be implemented even in the future. Why this should be discarded when the corroborative data is available & when this is the designed architecture to ensure that credit is correctly claimed by the exporter even when the online system is fully operational in future. Therefore, to my mind, this is the second instance of deceitful conduct & idiocy where the authorities are not ready to accept what is supposed to deliver the results in the future in the online operations.

Not only this, there was GSTR 2A compiled & available in the system. There are details of credit flow from the suppliers to the recipient visible in the system. Therefore, why this should not be put to use? The moot question is that why then this was designed & implemented to waste the time, energy, effort & resources of all concerned. If you will see the data sheet print out then you will realize the reports are simply worthless. The report simply tells you the GSTN of the supplier & that whether the counter party has submitted the data. There is no amount of supply & the GST visible on a consolidated basis. Therefore, to my mind, this is the third instance of deceitful conduct & idiocy where the authorities have not bothered to device a report, which will serve a purpose to effect the refunds of the exporters. At the very least, the authorities are obligated to inform that why this is being junked at this point of time & how can this deliver results in the future?

Finally, the exporters were made to complete the verification of Input tax credits through GSTR 2. If the exporters completed that then once again, why their efforts should be trashed? It is pertinent to point out that this was significant because the discrepancies were to be resolved through this. The discrepancy in respect of any wrong claims as well as missed out ITC claims was to be resolved through this mechanism. However, it is very surprising that this data is reportedly missing from the system as on date. At the very least, the authorities are obligated to inform that why this data has vanished from the system?

Last but not the least important is the fact that in my analysis of the position of the trade, more than 99% of the exporters did not claim the complete GST credits in GSTR 3B. There is discrepancy because the GST holder did not have adequate control in respect of the receipt of all the documents to claim the ITC up to 20.7.2017. Some of the banks & service providers collected the GST but did not provide the taxable invoices to the recipients. The GSTR 3B revision has not been allowed & therefore the beneficiaries are at a loss in terms of the claim of credits. Thus in respect of export refunds, the proportionate refund is as good as lost. Why the exporters should be put to such losses because things are really beyond their control? Why there is no provision for supplementary claim? It is difficult to believe that the GST authorities are not even aware of the ground realities.

Another important issue is that if you have adopted a systems oriented approach then the credit authentication should be completed by the assessing officer & not the GST claimant. The assessee cannot be treated as unpaid servant of the government to perform the task. In a software oriented approach, what else the assessing officer going to do? Why should they behave as British Lords & do nothing by themselves & treat the exporters as dirt i.e. those who are doing a service to the nation.

Please note that as per the framework, it is apparent that the ITC credit cannot be challenged at the time of refunds as such because assessment of ITC refund validity is a complex process to be completed through SCN etc. & appeals if required therefore the refund needs to be settled as per the claim & any erroneous refund recovered in case there is a discrepancy observed in the claim with applicable interest. The examination of ITC credit cannot be allowed to continue to delay the refund of the exporters. Therefore, there should be no reason to submit the copy of each & every invoice in respect of ITC of the supplier to process the refund claim of the exporter. Please note that under the system oriented approach, how will this work in future. The exporters are not going to upload each & every invoice for examination before the refund claim is settled. Therefore, it is very important to know that what is the intention of the GST authorities at this point of time in asking the ITC invoice copies & how this verification of individual invoices will be implemented in the future? The field formations are asking for the ITC invoices, which is absolutely wrong because that cannot be the way of functioning in any case. Therefore, to my mind, this is the fourth instance of deceitful conduct & idiocy where the authorities are only interested in holding the exporter to a ransom & therefore this cannot be allowed to continue.

Last of all, the exporters were asked to file Table 6A to claim their ITC refunds manually because the system has failed to perform & deliver the results. Therefore, it is crystal clear that the exporter is being reportedly facilitated to get the claim settled expeditiously based on Table 6A as well as the GSTR 3B. There should not be any difficulty in settling the claim to the extent of 90% on provisional basis. Thereafter before releasing the balance 10%, the GST official should examine the data filed online & call for the sample documents for examination & after examination complete the settlement of the claim. The exporter should be given a chance to rectify the discrepancy i.e. make additions in terms of the ITC credit wherever the invoices were not available or the credit could not be claimed. Further, it is also pertinent to note that the exporter has also filed the RFD 01 & obtained Application Receipt Number (ARN) & within 7 days of the ARN, the provisional amount of 90% of the refund claim has to be released to the exporter. The readers will note that the GST officials have not been able to implement this & they will never pay the interest of their own. It is such a pathetic state of affairs that the departmental officials are not even able to access the GST details of the assessee on the portal or the ARN. It is difficult to understand that how such a GST system can be touted as successful implementation. The GoI was to refund the money of the exporter within 7 days of the GSTR 3 return that being the last in the series of events for the ITC refund to be processed but the July claims are pending till date. Not only this, the arrogance of the officials in the field formations is beyond tolerance. They simply behave as if they are above god & that is rubbing salt in the wounds of the exporters. Therefore, it is incumbent on the GST council & the CBEC to intervene that unnecessary harassment stops & the refunds credited to the exporters accounts immediately based on Table 6A & GSTR 3B. It is important to note that the business is based on trust & the GoI has to trust the businesses in respect of the claims, which are well documented & supported by the back-up provided by the data uploaded by the suppliers & this being the backbone of the whole online system. This common sense approach cannot be frowned upon or discarded by the GST authorities viz. Policymakers & implementers & the GST council in any case. The readers will note that of any excess credit is erroneously refunded to the exporter then the same is refundable with penal rate of interest @ 18% per annum therefore the interest of the GoI is fully protected. No exporter if foolish enough to shell out the penal interest.

Any reader will notice that how can the GST authorities denounce the system they devised in the first place & then the same is to be used to deliver results in the future? How can the authorities advance such idiocy & not be perturbed about it? Any person with little application of mind will conclude that why the GST authorities were not in a position to give the complete matrix of applicable duties & how the exporter is to be relieved of the applicable duties by way of exemption/remission? Further, why in a systems oriented approach, a complete flow chart of how the complete system for ITC refund operates & ensures results could not be made out & put in the public domain for the exporters to understand & address the problems? Why should there be a game of deceit put in play & why this cheating be tolerated? You can get the facts narrated hereinabove examined in any business school of repute & the conclusion would be that those formulating the policy & procedures are themselves responsible for the abject failure & this fiasco! The transparency with adequate notice of what the rule based system comprises of is the very basic requirement so that the users can study & understand the same for implementation is the way forward. On the other hand playing the cards close to the chest & delayed release is a sure shot recipe for disaster & this is what unfolded in the case of GST implementation & this is for all to see.

Another very serious problem observed is that the ITC refund of IGST is not allowed in case the exporter has claimed the duty drawback in respect of the exports. The fact remains that this condition is ridiculous because as on date the duty drawback rates pertain to the incidence of basic customs duty suffered by the imported inputs &/or excise duty or electricity duty or any other tax not subsumed under the GST going into the manufacture of exports therefore there is no reason to disallow the ITC refund of IGST in case duty drawback is claimed by the exporter. It is difficult to comprehend that if this condition is applicable then how can the exporters claim the terminal GST as well as ITC refunds in respect of exports conducted under the Duty drawback scheme. However, in case of DES, where duty exemption is availed, there is no such condition applicable. The apparent discrepancy needs urgent attention & resolution. You can’t carry forward old provisions of law without any application of mind.

There are several other problems faced by the assessee, which also need urgent attention. These include, Digital Signature Certificate not being usable on the portal, locating the relevant jurisdictional office & non acceptance of the documents for refund by the jurisdictional authorities even in the commercial capital like Mumbai; claim of credit in respect of old rebate claims by way of re-credit, credit in respect of duty payments in case of past advance authorization as on date or de-bonding of the EOU unit therefore all these problems need to be resolved. It is really very surprising that how all these lapses could creep into the system & why they cannot be dealt with on immediate basis. It is difficult to understand that how such a completely botched up system & clumsy implementation thereof can be termed as a success by the government of the day. On a very serious note, if this is success then what will be failure & if we do not even recognize the disaster then can there be a solution. I am not able to reconcile to the fact that whether business ethics taught at the IIT/IIM stirs the conscience of the bureaucracy to behave in a responsible & accountable way at all. Can it then be possible to hold the software company for the complete failure of the system when no trials were ever conducted in terms of the real operation of the system & even the rules of the game not made available to the users of the systems right up to the day of the introduction! It is really very surprising that the authorities were not willing to put the things in the public domain till the last moment & that surprisingly remains the way of functioning till today. Why there should be any secrecy exercised when the system driven approach is adopted for the benefit of the users. The moot question is that why we advance idiocy & then why the experts on the TV shows are always lining up to hail even the failure of the system & botched up implementation & failure to handle the refunds of the exporters as a grand success & that is therefore left to the decision of the readers! To bring some semblance of facilitation & discipline, the GST authorities should put the details of the ITC refund claims settled on the GST portal on everyday basis at the very least. Failing this, the exporters will continue to suffer for no fault of theirs.

(Author Rajiv Gupta can be reached at [email protected])

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  1. ASHWIN GALA says:

    Dear sir,

    I complement you for the Article. One more idiocy need to be high lighted.

    As per GSTR 3B filed by 100% Exporter- No sales other than Export

    OF JULY : ITC Rs. 80000/- Export NIL
    OF August : ITC NIL Export 5 lacs WITHOUT PAYMENT OF IGST

    Now in GSTRFD 01A Refund is auto populated.

    With above figures NIL refund is auto populated.

    In July NO refund because no Export & JULY ITC not allowed to carry forward

    So in August Export is there , but NO ITC refund allowed.


  2. Nimish says:

    While Filing GSTR-3B for August 2017, the system was not able to capture the figures that we put. Instead the figure went in the return as Zero. Now our entire ITC Credit of Approx 70lakhs is not showing on the GSTN portal due to system error. Also there is no provision to rectify. What to do?


    “one of the reasons for which people prefer to work for the government is that there is absolutely no responsibility & accountability in the system. You may commit blunders, which can bring down the nation as a whole but then nobody can pin you down for failures.”
    Excellent quote. Which Secretary of Defence or Home or Foreign Affairs or for that matter anyone has ever been held responsible for any failure?

  4. Rajkumar Tex says:

    excellent article and a blast on govt on GST refunds. but a clarification not referred in yur article. some of our SB `s were sanctioned with ROSL as appeared in ICEGate portal. but not paid by the Customs. and another confusion is ,paid IGST will be refunded for exporters w/o LUT, and sec 54(3)(ii), is saying exporters not eligible for ITC of CGST and SGST for inward supplies, if Draw back availed.

  5. Rohit Gupta says:

    For Export of good shipping bill will be considered as proof of export.
    what about Export of Services?.
    and how long shall our funds be blocked in name of refund?

  6. sushil Sureka says:

    Kudos Sir. What a frank, fitting and fiery article. The first para defines the root cause. No accountability for government officials. Wish there were some in FICCI and CII who could speak up in the GST council.

  7. Prakash Mehta says:

    How is it funny, the GST council and revenue secretary terming the granting of refund etc. as relief package to exporter.
    it is foolishness on their part to digest that exporter are asking the refund of their own money which they have paid

  8. Prakash Mehta says:

    this is the high time that GOI shall wake up and take serious call to make bureaucrat accountable for non-performance. There is as such no change in the manner of administration in Govt. Dept.
    GSTIN is not above to provide any effective support for resolution of technical issue in filing of return. Helpdesk is not eqiquiped with any technical knowledge. They are just like back office telephone operator of GSTIN.
    I think now time is due for nation- wide agitation by business community in general and by exporters in particular to wake the Govt. to set right the process.
    As of now GSTIN is not fully prepared to handle the entire cycle of filing, GST council is talking about implementation of e-way bill to harass the businesses further.

  9. Vineet says:

    Even the refunds forms are not submitted due to system error in GST log in. For services, GST refund which was collected in initial months is not rolled out yet. Non-sense and foolish implementation because the person in implementation are not touching the ground realities and are parachute jump and giving them ideas.

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October 2021