IGST crackdown: Exporters cry foul; govt refutes allegations of harassment

Say they are being harassed by the authorities even as 1,500 who claimed bogus GST refunds are untraceable

Exporters have alleged that the authorities are harassing some of their colleagues after 1,500 were found to have claimed bogus goods and services tax (GST) refunds. 

Around 5,500 exporters have been identified as ‘risky’ and are bearing the brunt of physical checks of their consignment. They have been told to submit volumes of documents besides facing blockage of IGST credits. 

Exporters have alleged that the authorities are asking for over 1,000 documents, in some case, for verification, arguing that the default is mainly on the side of suppliers rather than exporters. 

The absence of an invoice matching system under GST has led to the fraud. The Federation of Indian Exports Organisations (FIEO) has taken up the matter with the ministry of finance and department of commerce. It has called for immediate release of refunds, while seeking efforts to trace missing exporters using the document trails.

It attributed the non-compliance, in some cases, to the suspension of invoice matching mechanism under GST, as exporters were not aware that their suppliers did not pay GST. 

“An exporter may be at risk for various reasons, with one prime reason being that either the supplier or suppliers’ supplier has not deposited GST. Several exporters were not aware that the suppliers did not pay GST. They could not confirm that as GSTR2 (purchase returns) and GSTR3 (input-output returns) forms have been suspended,” Ajay Sahai, director general (DG) and chief executive officer (CEO), FIEO, told Business Standard. 

He added that at this point of time, liquidity was a big challenge, and the government should acknowledge that and assist exporters.

In view of technical glitches on the GST network (GSTN) portal, the government had suspended the detailed return forms - GSTR 2 (purchase) and GSTR 3 (sales purchase return) in November 2017. Returns filed under forms GSTR-1(sales) and GSTR 2 had to be matched with the GSTR-3 form to ensure that the claims made by taxpayers are correct.

According to the ministry of finance, as many as 1,474 exporters, termed ‘risky’, claimed IGST refunds worth Rs 2,020 crore. These exporters include some ‘seven-star’ names — five based in Delhi and one each in Kolkata and Mumbai. Overall, a bulk of the fraud cases — 1,125 — are from Delhi, followed by Surat, which had 215 cases, Thane (28), Faridabad (15), and Kolkata (11). A finance ministry official said the claims of harassment are false and come from risky exporters lobbying with prominent trade associations.

The ‘risky’ exporters have been asked to deposit volumes of documents. “If I have taken supplies from 50 suppliers in the last 12 months, and 10 items from each supplier, that makes it 500 documents for that only. In many cases, they want supplier details also, which is quite voluminous, especially in this hour of crisis,” said an exporter.

Besides, the supplier rating mechanism under GST remained non-functional, three years down the line. “The CGST Act has a provision of rating suppliers based on compliance, which, for various reasons, has not been implemented till date. If that was the case, several suppliers would have been blacklisted by now. It is a system lacunae that is causing this problem,” said Sahai.

FIEO has urged the commerce department and finance ministry to use existing data from PAN card, income tax, customs, Directorate General of Foreign Trade (DGFT) and GSTN to trace missing exporters. “All the documents and information available with different agencies should be pooled to trace them and bring them to book. This will help the entire exporting community,” FIEO urged the government in a letter. It has also asked for issuance of showcause notice to these exporters for cancellation of the import-export code (IEC) by the DGFT.