GST Updates

Tough Times:-Agony of Exporters in GST set to increase many-fold

Irony but true:

Case 1:- A trader recovers his tax paid on Purchases by charging to the customer and exporter recovers his tax paid on purchases from the government. Exporter is made to wait for recovering back the tax after detailed verification of credit with the period running into months and trader gets the credit of tax just by filing of return and verification taking place after two years.

Case 2: Can the Government tout construction of a “Kachi Road” in one year as achievement for walking of people when they had assured of world class road to be constructed in six months. It is nothing but hiding of Inefficiency of Government in the name of relief to the Taxpayers.  

Case 3: What does a person having turnover of Rs 3 Crore do when Rs 50 Lakh are stuck GST Refund. Howsoever implementation of GST was difficult, but does that gives a right to the government to bring businesses closer to extinction due to blockage of working capital. Does the person whose business is stuck asked the government to bring GST and let his business be closed down.   

Case 4: In an era wherein, United States is in a battle with India for their business community, exporters in India are still licking their wounds after 9 months of implementation of GST. With the GST Ball rolling out, they find themselves in midst of a full blown storm with no immediate relief in sight.

During the last three months, slowly the issues were getting resolved and things were trickling back to normal with refunds starting to come to the place where they belong i.e. to the bank accounts of the exporters.

But Circular No. 37/11/2018 dated 15th March 2018 which eased certain compliances for the exporters has made their life difficult and would increase the agony of exporters multifold and what’s more circular comes on the day when Special Refund Drive for Exporters is being observed.  In a high handed statement circular mandates for submission of copy of all invoices for which refund is being claimed as follows:

For processing of refund claims of input tax credit, verifying the invoice details is quintessential. In a completely electronic environment, the information of the recipients’ invoices would be dependent upon the suppliers’ information, thus putting an in-built check-and-balance in the system. However, as the refund claims are being filed by the recipient in a semi-electronic environment and is completely based on the information provided by them, it is necessary that invoices are scrutinized.

Let’s start with a clear line of thought that for refund to be processed, verification of Input Tax Credit is a must. The wrong doers shall not get the refund amount and as grant of refund involves outgo of funds for the exchequer and more importantly public money, there should be checks and balances for the grant of refund. Let’s deliberate in brief that how submission of invoices alongwith the application of refund raises many questions rather than settling them down:

a) Refund amount set to be blocked for a longer period: As per provisions of Sub-Rule (2) of Rule 90 of CGST Rules, 2017 proper officer shall within a period of fifteen days of filing of application for refund, scrutinize application for its completeness and where application is found to be complete, he shall issue acknowledgement for refund application. Further, he shall make an order for sanctioning the amount of refund on a provisional basis within a period not exceeding seven days from the date of the acknowledgement.

 Now the question arises, in case of exporters having substantial refund claim and submitting say 2000 invoices in a month, who is going to verify invoices within 15 days and issue acknowledgement. Will it possible for an officer to verify those invoices and issue the acknowledgement. Further, such officer would be having at least hundred such applications which would be filed on a monthly basis. Further, if an error remains for incorrect refund, such officer would be held responsible for non-verification. Therefore, officer would also not be in a hurry to process the refund without verification. So who and from where time would be culled out by a single officer for such detailed verification This would result in unending delays in issue and acknowledgement and in turn grant of refund.

The manual refund applications are set to be pending for a longer periods and the queue of exporters waiting for their refund is set to increase. With limited staff force which present tax offices have coupled with the increase in the taxpayers, it’s impossible that each invoice can be verified by the tax officers in such a short span of time. It’s a rewind back of times wherein in an era of digitization, government is taking us back to era of copies and photocopies.

 

b) Different Yardsticks for Export without payment of tax and with payment of Tax: In case of Export without payment of tax, invoices are required to be submitted alongwith refund application. However, there is no such requirement in case of export with payment of tax as the refund application is going to be processed by the custom port from where the exports have been made. When refund to the exporters exporting the goods against payment of IGST can be given without verification of invoices, why can’t the same yardtsick be adopted for exporters exporting the goods without payment of taxes. Why two different yardsticks for exporters and can this discrimination be justified on any ground.

 This makes the goods of exporters making export without payment of tax more costly than the exporters exporting goods against payment of taxes as their working capital is blocked for a longer period.

 

c) Trader vis-à-vis Exporter: Is it possible and if at all, ask a person who has deposited Tax of Rs 1 Lakh after taking credit of Rs 2 Crore that he has to deposit entire Input tax credit of Rs 2.00 Crore and then after verification of credit with some thousands of invoices running into months, he would be given the credit. If it’s not possible, then question arises, why yardsticks changes for the exporters with only difference being that a normal trader recovers his tax by charging to the customer and exporter recovers his tax from the government. Exporter is made to wait for recovering back the tax after detailed verification of credit with some thousands of invoices running into months and trader gets the credit of tax just by filing of return.

All things agreed that checking of invoices is quintessential, incorrect refund casts a burden upon the exchequer etc. But who stopped GSTN to bring robust system in place on day 1 of implementation of GST and why even after 9 months of implementation of GST, exporters are made to suffer for their inefficiency.

The answer does not lies in the fact that government is relaxing the conditions. The relaxation is not because of request from the taxpayers but it’s the government whose system has failed big time in catering to the needs of the taxpayers and its not a relief but an obligation upon the government to grant relaxations.

Request is to bring a robust system and do not let businesses be closed down due to inefficiency of the system. This article does not favour incorrect grant of refund but then does checks and balances can go to such an extent that they discriminates not only between two different nature of businesses but also between exporters. Can such checks and balances bring the businesses to the brink of extension in the wake of inefficiency of government. Does anybody stopped the government to bring in a more robust system and why should a honest taxpayer suffer for the wrong doings of dishonest taxpayers.

It’s need of the hour to understand that an exporter is not only competing with the competitors within the country but more importantly from the players outside the country as well. Government needs to understand that blocked refunds have casted a serious question over the sustenance of businesses. Businesses would go extinct if there are any further delays in the refunds being processed for the exporters.

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