Govt identifies 5,106 'risky exporters' who have fraudulently claimed GST refunds

New Delhi: The government Thursday said it has identified 5,106 "risky exporters" so far who have claimed GST refunds based on bogus invoices, and would manually check their claims before issuing refunds.

According to sources, such fraudulent claims of Integrated GST (IGST) refunds by exporters could exceed Rs 1,000 crore.

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 on Monday 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.

"Only 5,106 risky exporters have been identified so far as against about 1.42 lakh total exporters. Thus the risky exporters are only 3.5 per cent of the total exporters...

"Even for these risky exporters, the exports are allowed immediately. However, the refund would be released after verification of ITC within a maximum of 30 days," the CBIC statement said Thursday.

The introduction of manual checks in IGST refunds is aimed at preventing unscrupulous exporters from defrauding the exchequer, the CBIC added.

It said that in the last two days -- June 17 and 18 -- only 1,436 shipping bills filed by total 925 exporters have been interdicted.

"Considering that about 20,000 shipping bills are filed by roughly 9,000 exporters on a daily basis, the intervention is negligible," the CBIC said.

"The new verification exercise is aimed at preventing unscrupulous exporters from defrauding the exchequer and bringing a bad name to the larger exporting community. CBIC would like to assure all genuine exporters that they would continue to get their IGST refunds in a timely manner in a fully automated environment," it added.

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," the instruction said.

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 has come to the notice of taxmen that certain exporters have availed ITC on the basis of ineligible documents or fraudulently and utilised that credit for payment of IGST on goods exported out of India.

"It has also been observed in several cases that there is 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," the CBIC said.

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, the CBIC instruction said.