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CA Madhukar N Hiregange,
& CA Anil Bezwada

Introduction

In my earlier Article I had discussed the entitlement of interest on delay in sanctioning IGST refunds for the exporters who were selected. [risky exporter alert]. Off late it is observed that many exporters who have been selected for risky exporter verification find their refunds are/ were held up for unknown reasons though verification is completed successfully. Genuine exporters from various parts of the Country are perplexed on how to resolve this issue. Though GST department claims only a miniscule percentage of exporters have been selected for risky exporter verification, it appears many exporters even with a good reputation over couple of decades in exporting the goods have been also selected for this verification!!

GST

Scope of verification by the GST Authorities 

The actual scope of verification by the GST Authority in the context of Risky Exporter Alert is examined. Circular no.131/1/2020-GST dated 23.01.2020 described the Standard Operating Procedure (SPO) to be followed trade & GST officers. Exporters have to fill & file Annexure-A to the above Circular along documents specified with the GST Verification Authority.

From the Annexure-A the exporters must submit the following information: –

  • The details of Directors and their KYC documents
  • Turnover details of previous Financial Year
  • GST Output liabilities & ITC details
  • Details of Refund claimed
  • Bank Account Details, Bank Statement of last 6 months
  • Copies of the rental agreements, Phone Bills and electricity bill copies etc.

After verification of the above documents, the Commissioner of GST has to be give the recommendations on the bona fides of exporter to Director General, DGARM. Based on the positive feedback, DGARM should remove the risky exporter alert. Once alert is removed, the exporter would receive the Duty Drawbacks & GST Refunds promptly.

CBIC has rightly observed the instances of availment of IGST refunds using fraudulent ITC claims by some fraudulent exporters. That is the reason DG (Systems) is identifying such risky exporters at the national level with suitable criteria with help of data analytics. The scope of the verification or role of verification authority appears restricted to following only: –

  • Whether the exporter & the factory is existent, or it is a company on paper only?
  • Whether the Credit has been availed on fake bills or ITC availed on genuine purchases?
  • Whether the Capital Goods purchased by the exporter are installed in the factory?
  • Whether description stated in the Shipping Bills/export declarations are properly matching with the goods on physical examination by Customs authorities?

The scope involved in the risky exporter verification is supposed to be narrow, limited to extent of identifying the genuinity & bona fides of the exporter. However, the GST verification authority is taking months together!! It is a mockery of the department that officers are verifying the GST compliances of vendors of exporter (Level-1 verification) and also verifying the GST compliances of vendor’s vendor of exporter (Level-II verification). Many times, vendors are located in many parts of country and exporters would not be having the control on how far vendor’s and more so vendor’s vendor would co-operate with their GST authorities in completing the verification.

The worst part of the story is that till the verification is completed, exporters refunds would be held up with the Customs Authorities. Many times, for simple reasons like availment of some ineligible ITC, non-payment of GST on some indirect incomes like scrap sales, minor differences between the ITC in GSTR-2A & GSTR-3B, differences between turnovers in GSTR-1 & 3B the exporters were recommended to be kept in risky exporter alert. This is unfair.

Timelines for completing the verification

SOP states that subject verification by GST authorities have to be completed within 14 days of submitting the information. SOP further states that if the verification is not completed within 14 days from the date of submission, the exporter must escalate the issue to jurisdictional Chief Commissioner for redressal. Still if the issue is not resolved the exporter must communicate the grievance to CBIC by registering his grievance at www.cbic.gov.in/issue.

Unfortunately, on the ground many times months together there were no replies from Chief Commissioner’s or CBIC’s office on escalation by the exporters. There is no access available to exporters to enquire or to visit the DGARM officials to know status & where their file is stuck up as DGARM is doing the undercover operation (Officers are perceiving like this). GST verification authorities are simply throwing the ball to DGARM Court saying that verification is being done according to instructions of DGARM officials. DGARM officials are not available public domain, they are not be available on their official phone numbers and there is no replies for queries sent to DGARM officials. The genuine exporters are really in dark, they simply do not know to whom they need to approach will resolve their issue. Is this the transparency that CBIC assures?

It is time for the Government to wake up, help the exporters in releasing the refunds fast. Hon’ble Prime Minister all along is canvassing on ‘ease of doing the business’ which means officers have to help the trade in resolving their issues. But unfortunately, sorry to say the present set of Government bureaucrats are creating the problems instead of solving the problems of trade. One reason can be that they are the only section who are not accountable under law or otherwise. They hide behind – passing the buck of bona fide action.

India’s export performance is poor when compared to other countries in international trade and again credit goes by & large to our Government administration and our regulatory environment. Government should realize the fact that only if this GST refunds amount are released & used for operations, then only exporter would be able to be competitive and access working capital funds to fulfill export orders. Government regulatory environment is pulling back the exporter from international trade. Smaller SE Asian countries are exporting where we are failing.

It is high time for the Government to release the IGST refunds to exporters immediately which were on hold for long time. The legislature in its wisdom vide Section 16 of the IGST Act, 2017 is grating the refunds to exporters, it is rule of law, it should not be dwindled down or curtailed by the tax administration. If the refund is delayed for quite substantial time, it is as good as refund is denied. It is mistake /incapability/institutional error of the part of Government in sanctioning the refunds to fraudsters initially, it should not be reason for denying/delaying the refunds to genuine exporters. I will complete this writing with famous quote in the words of Great Nani Palkiwala:- solutions sometimes don’t demand the change in the law but change in heart of policy makers.

70 years of post-Independent India, though late it is time for bringing the institutional changes administration & governance, attitude of bureaucrats, transformation in the Government administration to really advance & implement ease of doing the business by sanctioning the backlog refunds immediately. Otherwise slogan of ease of doing the business will remain only on the paper and restrict to press meets rather reality.

It is my advice that any refunds were held up for a long time say more than 6 months for genuine exporters, such exporter should file WRIT petition before jurisdictional High Court for immediate relief.

For any further queries/comments please write to anil@hiregange.com, Mobile 9989604111, madhukar@hiregange.com     

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6 Comments

  1. Arvind Gupta says:

    DGARM – Noc not received.
    My bonafide report us with DGARM
    L1 supplier bodafide reprt with DGARM & also got noc one year ago.
    L2 which is supplier of my supplier – DGARM not received his report. we don’t have any relation with L2

  2. Sudhagar Vishwanath says:

    Sir, The article described the fact. Our IGST refund stopped by custom. The complete audit done by CGST office and forward report to HO CGST and they forward to DGARM. (8 month took for audit) (2 month took for report to DGARM) Already 2 month passed no any update from DGARM we took 28 visit to CGST HO. No query in audit. No contact to DGARM… We are writing letters to customs reply coming yet no NOC recd from DGARM/RMCC. Great process… Lost trust on Dept.

  3. Rajkumar Tiwari says:

    Its my Question not comment, a SEZ Unit receives ITC from a common head office (for DTA & SEZ operations) through a ISD Invoice, as per ISD GST rules, SEZ Unit is exporting its entire finished goods, what will be the use of such ISD ITC amount, may it be refunded against Exports of Zero rated, please reply over my email sir

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