The issue of 'risky' exporters took an ugly turn after the government blamed some of these exporters of using prominent trade associations to lobby against the crackdown. Finance Ministry sources are now saying that despite the noise created against the crackdown, the government is planning to take stern action against these risky exporters, who have claimed IGST refunds worth Rs 2,020 crore and are now untraceable. The number of such untraceable risky exporters so far has gone up to 1,474. Sources said that IGST refund has been suspended in all those cases where there were adverse report about the exporter or its suppliers post verification.
Sources from the Central Board of Indirect Taxes and Customs (CBIC) have said that finding themselves in a tight corner, fake and risky exporters are using major trade associations to term the crackdown against fake input tax credits (ITC) as a harassment. The indirect taxes board rebutted exporters' charges that they have been asked to produce over 1,500 documents each for verification. Terming this as completely untrue, the sources in the CBIC said that the department verifies each exporter in two stages with hardly three to four documents.
They further said that customs officials have been sensitised to expedite refunds to genuine exporters in these difficult COVID-19 days.
Sources said that data analytics by CBIC's Directorate General of Analysis of Risk Management (DGARM), which is followed by field-level verification by CGST officers, has found 1,474 'risky' exporters, including seven Star Exporters, who tried to claim IGST refund of over Rs 2,020 crore. They were untraceable at their declared place of business, and therefore their refunds were rejected.
Exporters are identified as risky on the basis of specific risk indicators based on data from Customs, GST, Income Tax, and Director General of Foreign Trade (DGFT). The identified risky exporters are shared with the CGST department for physical and financial verification. Star exporters are those who receive several facilities, including reduced customs check.
DGARM has detected some fake exporters who fraudulently availed ITC taking advantage of the highly efficient fully automated IGST refund system. The general modus operandi of risky exporters was 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 in Surat (215), Thane (28), Faridabad (15) and Kolkata (11). These fraudulent exporters were mainly involved in 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 seven Star Exporters, five operated from Delhi, and one each from Mumbai and Kolkata. Adverse reports have also been received regarding three other 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 unsuccessfully tried to claim IGST refund amounting to Rs 28.9 crore.
Meanwhile, Finance Ministry sources further said that IGST refunds of more than Rs 1.37 lakh crore have been disbursed so far and only about Rs 2,026 crore is pending, which is being processed as per law. A grievance redressal mechanism with a 24x7 mobile helpline is available to genuine exporters to resolve refund related issues.