With Rs 14,000 crore GST refunds of exporters stuck in limbo, the CBIC has laid down procedures for revenue officers to fast-track clearances of pending refunds.
In a circular to principal chief commissioners and director generals, the Central Board of Indirect Taxes and Customs (CBIC) said that exporters who are awaiting refunds have committed mistake while filing GSTR-1 and 3B. Besides, there are certain cases where they have "short paid" Integrated GST (IGST) vis-a-vis their liability declared in GSTR-1.
"In view of the above, ... procedure is being prescribed to overcome the problem of refund blockage. This would be an interim solution subject to undertakings/ submission of CA certificates by the exporters ... and post refund audit scrutiny," the CBIC said.
Because of the mismatch in summary sales return GSTR-3B and final returns GSTR-1, GST Network (GSTN), the company handling the IT backbone for new indirect tax regime, could not transmit records to Customs EDI system and consequently IGST refunds could not be processed, it said.
Goods and Services Tax (GST), which subsumed over a dozen local taxes, was rolled out from July 1, 2017.
The CBIC, through a separate notification, has also clarified that exporters of exempted or non-GST goods do not need to submit LUT or bond for exports and such exporters will also be eligible for claiming refund of unutilised GST credit.
With the Federation of Indian Export Organisations (FIEO) claiming that refund clearance has slowed down and saying that over Rs 20,000 crore GST refunds are stuck, the government today issued a statement saying the refunds pending are to the tune of Rs 14,000 crore (Rs 7,000 crore on the IGST side and Rs 7,000 crore on account of ITC).
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So far, the government has sanctioned more than Rs 30,000 crore as GST Refund. This includes an amount of Rs 16,000 crore of IGST and Rs 14,000 crore of ITC (input tax credit), the ministry said.
PwC Indirect Tax Partner and Leader Pratik Jain said the move "should help in reducing the documentation requirements for such exporters and clearly allows for refund of ITC".
In the circular to field offices, the CBIC said cases where the exporters have "inadvertently mis-declared" IGST paid on export supplies as IGST paid on inter-state domestic outward supplies while filing GSTR-3B, the Customs policy wing will now send to GSTN a list of exporters whose cumulative IGST amount paid in GSTR-3B for July-March is greater than or equal to the cumulative IGST amount indicated in GSTR-1.
The GSTN will then send emails to these exporters informing them about transmission of records to Customs EDI system.
In cases where the refund claim is higher than the IGST paid on exports, the customs department will share the list of such exporters with GSTN which will in turn inform the taxpayers about this and ask them to make IGST payment.
"The exporters would have to make the payment of IGST equal to the short payment in GSTR-3B of subsequent months so as to ensure that the total IGST refund being claimed in the Shipping Bill/GSTR-1 is paid," the CBIC said.
The customs department will compile the list of exporters, who have claimed refund after making required payment or IGST towards short-paid amount, which will be sent to the GSTN.
"On receipt, if the list of exporters from Customs policy wing, GSTN shall transmit the records of those exporters to Customs EDI (electronic data interchange) system," the CBIC added.
Once the exporter receives the refund, he has to submit to the customs office a certificate from Chartered Accountant saying there is no discrepancy between the IGST amount refunded and the IGST amount paid on exports between July 2017 to March 2018.
"Non-submission of CA certificate shall affect the future IGST refunds of the exporter," it said.
The CBIC further said that the exporters will be subject to a "post refund audit" under the GST law.
EY India Tax Partner Abhishek Jain said, dilution of validation checks for refund to address inadvertent disclosures by exporters should bring a sigh of relief for some of our distressed foreign exchange earners. Also, clarification on non-requirement of Bond/ LUT for exempt supplies is a welcome move for many industries".
AMRG & Associates Partner Rajat Mohan said, "rather than hitting at basic issue of inability to revise GSTR-3B, government has laid out a detailed procedure loaded with multiple applications/ communications, CA certificate and post-refund audit for guaranteeing genuine refunds only and keeping the unscrupulous elements at a bay".
Beginning tomorrow, the CBIC is conducting second phase of 'special refund fortnight' to fast track clearances of exporters' refund.
In the first phase of refund fortnight observed between March 15 to March 30, the CBIC had cleared refunds totalling Rs 17,616 crore.
This comprised Rs 9,604 crore of Integrated GST refunds, Rs 5,510 crore ITC refund by the Centre and Rs 2,502 crore ITC refund by states.