The CBIC clarifies the procedure for processing GST refunds to “Risky Exporters.”

CBIC has issued a clarification on manner of processing and sanctioning of GST refunds which are or will be withheld due to the tag of “Risky Exporters” given by Directorate General Analytics and Risk Management (DGARM) to exporters who are identified on account of fake invoicing and fraudulent availment of ITC refunds. In view of this, the previous procedure of Standard Operating Procedures (SOPs) dated 23.01.2020 and 20.05.2020 have been superseded.

CBIC issued Instruction No. 04/2022-GST on 28^th November 2022 wherein manner of processing and sanction of IGST refunds, withheld in terms of clause (c) of sub-rule (4) of rule 96, transmitted to the jurisdictional GST authorities under sub-rule (5A) of rule 96 of the CGST Rules, 2017.

In light of loss of revenue faced by the government due to fraudulent and illegal means adopted by exporters to claim refund of IGST on exports, Government amended Rule 96 of the Central Goods and Service tax Rules, 2017 (hereinafter referred to as CGST Rules) retrospectively w.e.f. 01-07-2017 to provide for a legal standing to withhold IGST refund in cases where verification of exporter credentials is deemed necessary before grating the refund. Rule 96(4)(c) of CGST Rules, 2017 is as follows:

(c) the Commissioner in the Board or an officer authorised by the Board, on the basis of data analysis and risk parameters, is of the opinion that verification of credentials of the exporter, including the availment of ITC by the exporter, is considered essential before grant of refund, in order to safeguard the interest of revenue.

 In the abovementioned, “officer authorised by the board” shall mean Principal Director / Director General of Directorate general of Analytics and Risk Management (DGARM), CBIC, New Delhi and who shall exercise functions under Rule 96(4)(c) of CGST Rules, 2017 as notified by CBIC vide Order No. 01/2022-GST dated 21.07.2022 issued vide CBIC-20023/04/2021-GST.

Accordingly, sub-rule (5A) has been inserted in Rule 96 to provide IGST refunds withheld as a system generated refund in From GST RFD-01 and such system generated Form shall itself be deemed as an application for refund.

In view of the aforesaid amendments, certain changes have been made in the alert module on ICES also, advisory on which has been issued on 29-09-2022. In the said advisory, it has been informed of a new role for putting an all-India suspension, either on IEC or GSTIN of exporters to withhold IGST refunds. Similarly, an option to revoke this alert system is also made available to the DGARM officers

Process of identifying risky exporters:

DGARM would use data analytics and risk parameters to locate exporters where verification of credentials including the availment of ITC is considered essential before granting refund. DGARM would then place an all-India alert on Indian Customs EDI systems about such identified exporters with appropriate reasons.

Once an alert is placed on an exporter, the IGST refunds of such exporters would be withheld and data in respect of Shipping Bills filed by such exporter along with reasons will be transmitted to GSTN through ICEGATE for generation of claims in Form GST RFD-01 in accordance with the terms of provisions of Sub-rule (5A) of Rule 96. Same shall apply to the past cases where the exporter was identified as risky.

Such refund claims of risky exporters will be made available to the jurisdictional proper officer under the category “Any other (GST paid on exports)” with remark “Refund of IGST paid on export of goods (refund not processed by ICEGATE)” and the risk parameters will be shared with the jurisdictional proper officer along with system generated claim Form. On receipt of such refund claims, proper officer will ascertain the genuineness of the exporter and verify the correctness of availment and utilization of ITC by the exporter and exercise due diligence in process of refund and shall pass a detailed speaking order in respect of the refund claim and shall duly upload the same along with refund sanction order in Form GST RFD-06 on the portal.

Further, the proper officer would also be required to provide feedback on the common portal while issuing refund sanction order in FORM GST RFD-06 with recommendation as to whether the alert against the said taxpayer need to be continued or whether the same can be removed. The functionality for the same would be available on the system in due course. GSTN shall transmit the data regarding the outcome of processing of refund by the proper officer, along with the feedback received from the proper officer on the requirement of removal or continuation of alert to DGARM for taking necessary action for removal or continuation of alert.