Govt, industry at loggerheads over quantum of GST refunds for exporters

Exporters claim procedural glitches have led to pending refunds worth Rs 200 billion, Govt refutes claims

A day after the apex exporters body stated that the industry was waiting to receive a massive Rs 200 billion worth of tax refunds under the Goods and Services Tax (GST) regime owing to disbursals slowing down, the government on Wednesday has refuted the claims.

On Tuesday, the Federation of Indian Exports Organizations (FIEO) pointed out that refunds had flown smoothly till March 31, after which the pace has considerably slackened. "While claims over Rs 70 billion were cleared during March, the amount in April fell to a little over Rs 10 billion," FIEO President Ganesh Kumar Gupta said.

But in a detailed rebuttal, the Finance Ministry on Wednesday said the quantum of pending refunds was Rs 140 billion. "Contrary to press reports that there has been a dip in refund sanction after the first Refund Fortnight in March 2018, the refund sanctioned during May 2018 is to the tune of Rs 800 billion," the release said. It added that the government has till now sanctioned more than Rs 300 billion as refunds.

"It should be noted that Rs 140 billion is what has been filed, but they are not taking into account what the exporters are not being able to file unless the government modifies its software," FIEO Director General Ajay Sahai said.

Also, in order to liquidate the pendency, the government is starting a second “Special drive Refund Fortnight” from Thursday onwards. The exercise would facilitate all types of Refund claims in which Customs, Central and State GST officers will strive to clear all GST refund applications received on or before April 30, the Finance Ministry has said.

"The very fact that a clearance drive is being attempted and the last time it was successful in addressing a large number of cases about pending refunds, shows that under normal circumstances its not being attempted." Sahai said.

However, Commerce Ministry officials claim that one of the main reasons behind the stuck refunds is that many traders have not been able to file in the correct manner.

Procedural pains continue

"Earlier the refunds were flowing on a monthly basis, but from February the government has gone in for a cumulative calculation. Now, having an error in any month is enough to disrupt the entire process and as a result, many refunds have got stuck." Ajay Sahai, FIEO Director-General said.

Of the total pending refunds, Input Tax Credits constitute about Rs 130 billion while the rest is Integrated GST (IGST). Exporters have pointed out the ITC claiming process is not completely electronic and the roundabout manner in which it is organised has given rise to a lot of jokes in the exporters' community.

An exporter has to first file an application online after which his cash ledger is debited. He then has to take a physical printout of the transaction and file with the tax authorities. But the overburdened tax authorities are generally not willing to accept the same quickly. "This is because current rules stipulate that from the day of acceptance of the physical copy, within the next seven days, at least 90 per cent of the tax refunds have to be released," Sahai said.

Since many tax departments across the country have claimed they are running low on funds to pay back exporters, lower level officials have on many cases turned down legitimate claims, exporters allege. "We have received a demand for putting the ITC claims on a fully automatic route and are assessing it. We will incorporate all such suggestions before going for a further streamlining of the export refund mechanism in the GST," a Commerce Ministry official said.