For Exporter, refund of GST is available under Section 54 of CGST and SGST Act. Refund is available in following cases 1) IGST paid on Zero rated supplies 2) Tax paid on inputs for Zero rated supplies (Export supplies) 3) Inverted Duty Structure 4) If taxable person has paid excess tax by mistake 5) Excess balance in electronic cash ledger 6) Purchase made by UN Agencies 7) Refund to International tourists etc.,
In case of Zero rated supplies, taxable person can claim ITC on export supplies including deemed supplies (supplies to SEZ). But it is observed by the Department that many of these exporters are claiming false refunds by creating fake invoices and obtaining ITC against these invoices.
CBIC has issued SOP for refund of GST in case of exporters through its Circular No. 131/1/2020-GST dated 23rd January 2020. As the Department has witnessed a lot of false cases of IGST refund which was claimed against fake/bogus invoices for ITC. Therefore, Department is taking stringent actions to curb such false refunds but at the same time not to put the genuine exporters to hardship, has issued an SOP to be followed in case of such GST refunds.
CBIC has been using data analytics and other measures to detect fake refund cases and are doing 100% examination of goods at customs port in such cases. The points of SOP are:
1. The exporters who has applied for refund and their scrolls are on hold for verification, shall be informed at the earliest either by Customs or Jurisdictional CGST officer
2. Exporters who has been intimated of their scrolls on hold for verification, shall on their own interest fill the format of Annexure ‘A’ (format given with circular) capturing details in 3 parts. Part I – related to GST data, Part II – Financial data and Part III – Additional data of PAN, IEC, rent agreement, electricity bill etc., and submit the same to the Department for quicker processing of their refunds. – format attached
3. Verification shall be completed within 14 working days from the receipt of information in Annexure ‘A’. If the same is not completed within 14 days, it has to be brought to the notice of Nodal cell to be constituted for this purpose.
4. The exporter may also bring to the notice of Jurisdictional Pr. Chief Commissioner/Chief Commissioner if the verification was not complete within 14 workings days of information submitted.
5. Jurisdictional Pr. Chief Commissioner/Chief Commissioner of Central Tax should take appropriate action within 7 working days of receipt of such escalation.
6. If the issue is pending for more than a month, the exporter may register a grievance at cbic.gov.in/issue which will be examined by Committee headed by member GST, CBIC for resolution of the issue.
As we have seen, Department is already scrutinising every refund application in detail before granting any refunds to exporter. As observed, some of the parameters followed for verification is
1. Verification of export invoice matching with invoices uploaded on DGFT site
2. Verification of shipping bills, EGM (Export General Manifesto), BRC (in case of services) etc.,
3. Verification of GSTR 1 and GSTR 3B filing
4. Verification of ITC claimed in 3B vs credit available in 2A
5. In many instances asking further information with respect to purchase invoice copies, shipping bills, declarations etc.,
With these precautions undertaken, the number of fraudulent export refunds may come down but at the same time hope for increase in release of genuine refunds on time.