Stern action initiated against 1,474 untraceable exporters claiming Rs 2020-crore IGST refund

Stern action is proposed against the risky exporters who have been claiming IGST refund worth Rs 2,020 crore and were found untraceable, said Finance Ministry sources in the know of the matter, stating that the number of such untraceable risky exporters has gone up to 1,474 as on date.

Sources said that IGST refund is suspended in all such cases where there is adverse report post verification about the exporter or his suppliers. However, customs officials have been sensitized to expedite refunds to genuine exporters in these difficult COVID-19 days.

Finance Ministry sources said that so far, IGST refunds of more than Rs 1.37 lakh crore have been disbursed and only about Rs 2,026 crore is pending, which is being processed as per law.

Central Board of Indirect Taxes and Customs (CBIC) sources added that some fake exporters are lobbying with some prominent trade associations to allege that genuine exporters are being harassed by being asked for over 1,500 documents each for conducting verification, but this is completely untrue. CBIC verifies each exporter in two-stage verification with hardly three to four documents as per requirement, sources added.

Last week on behalf of export orgzations, Sharad Kumar Saraf, the President of the Federation of Indian Export Orgsations (FIEO) has said that every exporter has a PAN and a bank account before he applies for Importer Exporter Code. For opening the bank account, necessary KYC is done by banks also besides the introduction of an account by another customer. DGFT also keeps their email, telephone and bank details including the photograph of the person who applies for IEC. Exporters are also required to have GST registration providing email and mobile number, which is cross-verified through electronic mode. The registration of exporters is also done at Customs and bank details are captured in which IGST amount is credited.

"These exporters may also be members of some Export Promotion Councils/Authorities/Commodity Boards/FIEO who can also help in providing necessary information available with them. The Star exporters also submit Chartered Accountant Certificates, which are also at times verified by the licensing authorities.

We need to pool the information available, with all the agencies," said Saraf, to locate them as a few black sheep should not dent the image of genuine exporters of the country.

Sources said that data analytics by CBIC's Directorate General of Risk Management which is followed by field-level verification by CGST officers have found 1,474 'risky' exporters were untraceable; therefore their refund has been rejected.

Informed sources said that Exporters' Risk Management started in June 2019. Reportedly, some fake exporters have fraudulently availed ITC taking advantage of the highly efficient fully-automated IGST refund system to encash it after paying IGST on export goods and then claiming a refund. The general modus operandi of risky exporters is to pay IGST at the highest rate of 28 per cent in order to quickly encash the undue ITC claims.

According to sources, out of the 1,474 untraceable exporters, 1,125 exporters 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 the export of ready-made garments, wallpaper, 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 the export of ready-made garments, kitchenware, utensils, sound system, amplifiers, microphones, seafood, shrimps, unstitched fabric, sarees, dupattas, etc. They tried to claim IGST refund amounting to Rs 28.9 crore unsuccessfully.

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

( With inputs from ANI )