CBIC Clarifies on Processing of Withheld IGST Refunds of Risky Exporters

The Central Board of Indirect Taxes and Customs (CBIC) has released instructions on the new way of processing withheld Integrated Goods and Services Tax (GST) refund applications.

Earlier, CBIC issued the Standard Operating Procedures (SOPs) dated 23rd January 2020 and 20th May 2020. These were issued to CGST & Customs formations and the Directorate General of Analytics and Risk Management (DGARM) to verify risky exporters and their suppliers.

The earlier process was as follows:

  1. DGARM used the said SOPs to identify the risky exporters and respective suppliers based on risk parameters.
  2. Then forward the list of risky exporters to the Risk Management Centre for Customs (RMCC) to create an alert in the system.
  3. After that, the Customs field formations shall thoroughly examine risky exporters.
  4. Next, the jurisdictional CGST formations were required to verify risky exporters and their suppliers and forward the verification report to DGARM.
  5. After receiving the verification report from CGST formations, DGARM decides whether to issue NOC.
  6. Then, the DGARM used to communicate the NOC-issued exporters list to the Customs authorities for the release of withheld IGST refunds.
  7. Also, DGARM reviewed the possibility of removing the NOC-issued customers from the list of identified exporters.

However, the CGST Rule 96 has been amended retrospectively, w.e.f. 1st July 2017. The amendment is made to consider the exporter’s verification based on data analysis and risk parameters as a reason for withholding IGST refunds.

Accordingly, the department made certain changes in the alert module on the ICES, and DG Systems issued Advisory No.14, dated 29th September 2022. The advisory points out that DGARM officers can place an all-India suspension, either on the IEC or the GSTIN of the exporter, to withhold the IGST refunds. Also, the officers have been given the option to revoke the said alert.

The process is as follows:

  1. DGARM uses data analysis and risk parameters to identify risky exporters.
  2. Then DGARM would place an all-India alert on risky exporters on the Indian Customs EDI system along with the reasons.
  3. Once an alert is placed on a risky exporter, the system will withhold the IGST refunds of the such exporter.
  4. Next, the details of a such exporter, risk parameters used for identifying the risky exporter, reasons, and auto-generated refund claim in GST RFD-01 as per rule 96(5A) would be transmitted to GSTN through ICEGATE.
  5. Also, the previous cases which could not be processed due to a negative report or pending verification would be transmitted to GSTN through ICEGATE.
  6. All such refund claims will be made available to the jurisdictional officer.
  7. If the DGARM already has the risky exporter’s verification report, it will share it with the jurisdictional officer.
  8. Once received such refund cases, the jurisdictional officer shall immediately process them as other RFD-01 refunds filed. 
  9. After that, the officer shall pass a detailed speaking order of the refund claim and upload the same with the refund sanction order in GST RFD-06.
  10. The officer must follow the timelines laid down in the CGST Act while processing the refund.
  11. Also, the officer shall provide feedback on whether the DGARM can remove the alert on the risky exporter.

CBIC stated that they had initiated the transmission of withheld IGST refunds of risky exporters identified by DGARM to the jurisdictional officers on the portal. Also, it clarified that the above procedure would supersede the earlier SOPs dated 23rd January 2020 and 20th May 2020.

For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@clear.in

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