Fake GST refund claims: FinMin to crack the whip against over 1,400 ‘risky exporters’

Our Bureau New Delhi | Updated on July 26, 2020

The Finance Ministry has proposed stern action against ‘risky exporters’ who claimed GST refunds and are now untraceable. However, the Ministry has assured genuine exporters that there is no cause for worry,

According to ministry sources, 1,474 risky exporters claimed IGST (Integrated Goods & Services Tax, levied on inter-State trade) refund worth ₹2,020 crore and then were not available at the address mentioned in the application. Now, refund has been suspended in all such cases wherein there is an adverse report post verification about the exporter or his supplier/s. These risky exporters include ‘7 Star’ ones too.

Sources said that out of the total untraceable exporters, 1,125 are from Delhi alone. Non-existing exporters have also been detected in large numbers at Surat (215), Thane (28), Faridabad (15) and Kolkata (11). These fraudulent exporters were mainly involved in export of ready-made garments, wallpapers, wall coverings, leather apparel, smoking pipes, mobile phones, cigarette holders, footwear, plastics, floor coverings, ball bearings or roller bearings.

Out of the non-traceable 7 Star Exporters, five operated from Delhi, and one each from Mumbai and Kolkata. Adverse reports have been received in respect of other 3 Star Exporters – two in Mumbai and one in Jaipur. These Star Exporters were involved in export of ready-made garments, kitchenware, utensils, sound system, amplifiers, microphones, sea food, shrimps, unstitched fabric, sarees, dupattas etc. They tried to claim IGST refund amounting to ₹28.9 crores unsuccessfully.

‘Harassment claim false’

Sources said that refunds of more than ₹1.37 lakh crore have been disbursed and only about ₹2,026 crore is pending, which is being processed as per law. They added that feeling the heat, some fake/risky exporters are lobbying with some prominent trade associations claiming that genuine exporters are being harassed. Their claim that over 1,500 documents are being sought for verification is completely untrue. CBIC carries out a two-stage verification of each exporter with hardly 3 to 4 documents as per requirement.

Reportedly, some fake exporters have fraudulently availed the ITC, taking advantage of the fully automated IGST refund system. The general modus operandi of risky exporters is to pay the IGST at the highest rate of 28% in order to quickly encash undue ITC claims.

CBIC’s data analytics, based on 360-degree profiling of exporters using multiple data sources (GST, Income Tax, Customs, DGFT, etc.), intends to weed out fraudulent exporters from genuine ones with a high degree of success. The confirmation comes after CGST formations carry out a physical and financial verification of the risky exporters.

Meanwhile, customs officials have been sensitised to expedite refunds to genuine exporters in these difficult Covid-19 times, sources said. A grievance redressal mechanism with a 24x7 mobile helpline is available for genuine exporters to get their refund related issues resolved.

Published on July 26, 2020

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