More than 1,300 exporters wrongfully claimed the refund of Goods and Services Tax (GST) worth Rs 1,875 crores have been found untraceable at their principal place of business. The government has also identified 7,516 entities as risky exporters going by the red flags raised by various statutory agencies.
The government detected 1,377 exporters and seven exporters out of them are sanctioned as star exporters. This happened at the same time when the tax authorities are turning their attention back to compliance as COVID-19 compliance reliefs were over. The businesses were given extended time to file tax returns and audit reports in addition to relief on interest and late fee payable.
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 deceitfully claimed IGST refund of Rs 28.9 crore.
Refund of tax credits has always been a problematic issue with officials trying to make sure fraudulent claims are not granted. In contrast, businesses claim that delays in refund processing affect their liquidity. The fraudulent claim of tax refunds has been a common practice of tax evasion in the industry.
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As the adverse reports have been received in the case of many others, the authorities have suspended IGST refund or drawback claim worth Rs 1,363 crore in the case of 2,830 risky exporters. The exporters get the 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 Exporters are identified as ‘risky’ based on 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.
Now, we have to see how the CBIC responds to these types of incidents and what kind of additional verifications will be implemented in future to curb the illegal activities.
For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@cleartax.in
DVSR Anjaneyulu known as AJ, is a Chartered Accountant by profession. Loves to listening to music & spending time with family and friends.
