Bogus IGST refund claims: Govt to verify exporters' claims before sanctioning

With the government detecting fraudulent refund claims by exporters, the CBIC has asked customs and GST officers to closely verify the IGST refund claims before sanctioning them.

The Central Board of Indirect Taxes and Customs (CBIC) has also asked director-general (systems) to identify a list of "risky exporters" and share it with customs and GST officers, so that an alert can be generated for 100 per cent examination of their export consignments.

Currently, Integrated GST (IGST) refunds are issued to exporters automatically based on shipping bills filed with customs and goods and services tax returns filed with central tax authorities. The refunds are issued within a fortnight days of filing of returns without any manual intervention.

Tax experts said the move to verify the refund claims would delay the process of refund issuances to exporters.

In a letter to field offices, the CBIC said it has observed instances of availment of IGST refund using fraudulent input tax credit (ITC) claims by some exporters.

"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.

"It has been decided to verify the IGST payments through the respective GST field formations," the CBIC said.

It said the GST policy wing will devise a standard operating procedure (SoP) for GST officers to verify the IGST refund claims.

The GST officers will report to the chief commissioner of central tax in 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 were 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 have been reported on verification and it has been 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 said.

The CBIC said DG (systems) shall work out the suitable criteria to identify risky exporters at the national level and forward the list of said risky exporters to the Risk Management Centre for Customs (RMCC) and respective chief commissioners of central tax.

"DG (systems) shall 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)," it added.

AMRG & Associates Partner Rajat Mohan said, "Increased verification and corroboration from custom officers and central tax officers would push back the digital initiatives of government resulting in genuine hardship for exporters."