Exporters have been made the whipping boy for delays in goods and services tax (GST)-related exports refund. An exporter who is hard-pressed for liquidity and burdened with high cost of credit would like to claim his refund as early as possible. Instead, exporters refusing orders are now unable to pay their suppliers and are being compelled to cut jobs because of an extreme liquidity crunch. A young entrepreneur, with over a year’s hard work, finally gets an order of $400,000. He then finds his entire money blocked in refunds. How can India encourage entrepreneurship in such a situation?
Generally, tax authorities blame exporters for delay in refund for incorrectly filled columns in shipping bills, non-filing of the export general manifest (EGM), or any mismatch in GST returns. This is because of faulty processes and procedure, with some mistakes committed by exporters. If the tax authorities at the field are ignorant, how can we expect a micro, small and medium enterprise (MSME) exporter to be conversant with the tax laws, rules and procedures, especially when the last two are frequently changed?
Numerous refunds are pending due to mismatch of invoice details in shipping bills and GST refund (GSTR). If GST Network (GSTN) invoice details were required in the shipping bill, why wasn’t a column for it added or suitably modified? A provision for capturing both commercial and GSTN invoices was opened only in November 2017. A validation check of 16 digits could have mitigated the problem. In many cases, the Integrated GST (ISGT) amount in the shipping bill varies from that of GSTR. The tax paid amount is based on the transactional value while the shipping bill amount is based on the free on board (FOB) value of exports. But the IGST amount is supposed to be reflected in the GSTR. All that is required is to see that the relevant shipping bill covering the invoice has been exported. The IGST amount, as reflected in the GSTR, should be refunded.
Hinterland exporters are endlessly waiting, as the gateway EGM was incorrectly or not electronically filed by the shipping lines. The duty drawback is granted at the Let Export Order (LEO) with the filing of local EGM. But why have GSTR linked with EGM at all? When both are given for exports, why have different stages for refund? Many exporters who took supply from manufacturers at a concessional rate and exported on payment of full IGST during November and December 2017 and January 2018 received a jolt, as tax authorities have now clarified that such exports could only be under a letter of undertaking (LUT)/bond and not on payment of IGST. To top it all, this change has been given a retrospective effect—changes brought in on January 23, 2018 have been made effective from October 23, 2017.
What will happen to those exporters who have paid IGST and are waiting for a refund? If such exports were not intended on payment of IGST, why did the authorities allow them? How can we penalise exporters for the ignorance of the tax authorities?
The situation on input tax credit (ITC) refund is alarming. No more than 5% of exporters who filed the application electronically could submit it manually. It is imperative that GSTN and the Indian Customs Electronic Data Interchange Gateway (ICEGATE) are integrated with a common service provider. More importantly, let GoI show a commitment to help taxpayers, instead of making them run from pillar to post.