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July 19, 2020

Exporters absconded after wrongfully claiming GST Refunds of Rs 1875 crore

Exporters absconded after wrongfully claiming GST Refunds of Rs 1875 crore

When one hears the word ‘refund’, we feel fortunate that we are going to be united with our funds which were once paid as taxes. There are many situations where a refund arises on GST. Understanding the refund norms and criteria’s is extremely important so that one does not excessively partake with our money.  A claim for refund may arise on account of:-

  1. Export of Goods or services
  2. Supplies to SEZs units and developers
  3. Deemed Export supplies
  4. Refund of taxes on purchase made by UN or embassies etc
  5. Refund arising on account of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court
  6. Refund of accumulated Input Tax Credit on account of inverted duty structure
  7. Finalisation of provisional assessment
  8. Refund of pre-deposit
  9. Excess payment due to mistake
  10. Refunds to International tourists of GST paid on goods in India and carried abroad at the time of their departure from India
  11. Refund on account of issuance of refund vouchers for taxes paid on advances against which goods or services have not been supplied
  12. Refund of CGST & SGST paid by treating the supply as intra-State supply which is subsequently held as inter-State supply and vice versa.

GST follows a system of levying tax at each stage of the value addition in the industry. By relying heavily on technology, GST mechanism has made it easier for the authorities to profile tax payers based on their compliance track record. Refund of tax credits has always been a complicated issue with officials trying to make sure fraudulent claims are not granted, while businesses claim that delays in refund processing affect their liquidity. Claiming tax refunds fraudulently has been a common practice of tax evasion in the industry.

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Exporters absconded after wrongfully claiming GST Refunds

Under the GST law, exports are zero-rated supplies. However, all exports are subject to IGST, which can later be reclaimed through refunds against the tax paid. Exporters get refund of the taxes that go into the raw materials and services used as it cannot be part of the international price of their exports.

The detection of 1,377 exporters, seven of them accredited as star exporters, vanishing from their place of business comes at a time the tax authorities are turning their attention back to compliance enforcement after having given relief to businesses hit by the coronavirus crisis. The economic impact of the 2020 coronavirus pandemic in India has been largely disruptive. The lockdown though necessary has led to a disastrous impact on the economy. The Government of India announced a variety of measures to tackle the situation, from food security and extra funds for healthcare and for the states, to sector related incentives and tax and audit report deadline extensions in addition to relief on interest and late fee payable.

  • Over 1300 exporters who have wrongfully claimed Goods and Services Tax (GST) refunds worth Rs 1875 crores have been found untraceable at their main place of business.
  • The government has also additionally identified 7,516 entities as risky exporters going by the red flags raised by various statutory agencies.
  • The Central Board of Indirect Taxes and Customs (CBIC) has also received adverse reports about three other star exporters. These 10 star exporters together have claimed integrated GST (IGST) refund of Rs 28.9 crore deceitfully.
  • CBIC has also detected that 82 suppliers, out of the 234 verified so far, have been found non-existing at their principle place of business.
  • The tax department has also found 695 cases where suppliers of the exporters have availed input credit for which they were not eligible.
  • Authorities have suspended IGST refund or drawback claim worth Rs 1,363 crore in the case of 2,830 risky exporters. Adverse reports have been received in the case of many others.

Exporters are identified as ‘risky’ or ‘dangerous’ on the basis of specific risk indicators based on data relating to customs, GST, income tax and foreign trade transactions. Details of the identified risky exporters are shared with field officials for physical and financial verification.

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