Skip to main content

GST maze leaves exporters sulking for refunds

GST maze leaves exporters sulking for refunds
In its 22nd meeting on October 6, the Goods and Services Tax (GST) Council had asked the government to quickly refund to exporters the Integrated GST (IGST) paid on goods exported.Finance Minister Arun Jaitley announced that refunds will start from October 10, for exports made in July, and from October 18, for exports made in August.
However, most exporters have so far not received refund of the IGST paid in July or subsequent months.The Central Board of Excise and Customs (CBEC) issuedacircular on November 7, stating that refunds of the IGST paid on export goods cannot be made in many cases due to errors in export report/manifest (EGM), shipping bill and GSTR1 returns of outward supplies for July
The CBEC said that common errors include incorrect shipping bill number in July GSTR1 (that can be corrected only through Table 9 of August GSTR1), mismatch of invoice number and IGST paid amount in the shipping bill and GSTR1, mismatch of information filed in EGM and shipping bill or nonfiling of EGM, wrong bank account details given to Customs and manual shipping bills filed at some Inland Container Depots.
However, these discrepancies do not explain why most exporters have still not received refund of IGST paid on export goods.Investigations reveal that the EDI (electronic data interchange) system of the Customs is not suitably amended to take care of the new requirements under the GST laws and that is why the refunds are delayed.

An example would make this clear.An exporter prepares his GST invoice for exports of goods worth $100. If we take the exchange rate to be Rs 65.43 per dollar, the taxable value of the goods is Rs 6,543. Now, he calculates 18 per cent IGST on the value, which works out to Rs 1,177.74. So, he rounds it up to Rs 1,178, because in accordance with Section 170 of the Central GST Act, 2017, he is required to round up the amount to nearest rupee.

However, when he files the shipping bill in the Customs EDI system, it automatically drops the paise and rounds up the tax amount as Rs 1,177. When he files his monthly return in GSTR1, the exporter enters the tax amount as Rs 1,178, according to his invoice.
When the GST Network (GSTN) sends this detail to the Customs EDI system, the tax amount does not tally.So, the exporter´s refund claim does not get processed.If this was the only problem, at least 50 per cent of the exporters, who had to ignore fifty paise or less for the purpose of rounding up to the nearest rupee, should have got their refunds.But it is not that simple.
Exporters include several items in one invoice, work out the tax amount for each, aggregate the tax amount and then round off to the nearest rupee, whereas the Customs EDI works out the tax amount for each item ignoring the paise and then sum up the tax amount for the invoices.
Here is the example: In this invoice (see chart),the exporter rounds off the tax amount to Rs 5,300 in his invoice and reports it in his GSTR1 returns. But this amount does not tally with the tax amount of Rs 5,298 in the shipping bill
As the number of items increases and tax rates differ, the difference can be more.So, the Customs EDI software needs to be amended suitably.The second problem is that the Customs EDI system does not have a separate field to capture GST Invoice number and date.The exporters have entered these details along with description of goods or at any place convenient.
Now, the exporter reports the shipping bill number and date and the corresponding GST invoice number and date in his GSTR1 returns and the GSTN sends the same details to the Customs, where there is no automatic matching of the invoice number and date.
The CBEC blames exporters for giving different GST invoice numbers and IGST amounts in the GSTR1 returns and for Customs purposes.It is possible that there are cases of wrong mention of shipping bill number or GST invoice number or IGST paid amount, but such cases are likely to be very few.
For correcting these, the CBEC has asked the GSTN to make the Table 9A of the August return available.The best course for CBEC is to disburse the IGST amount shown in the shipping bill or invoice straight away till the Customs EDI software is set right.
The Business Standard, New Delhi, 1st November 2017


Popular posts from this blog

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

GST Refund of Rs 20,000 Cr Pending: Exporters’ Body

GST Refund of Rs  20,000 Cr Pending: Exporters’ Body Refund of over Rs 20,000 crore on account of Goods and Services Tax (GST) is pending with the government with more than half the amount stuck as input tax credit, Federation of Indian Export Organisations said on Tuesday. While claims over Rs7,000 crore were cleared in March, the amount was Rs 1,000 crore in April.However, after exporters’ request, the GST council and tax department are organizing a second phase of Special Refund Fortnight starting May 31, which will enable exporters to draw their refunds at a speedy pace. Many exporters have been unable to file the refund of input tax credit due to technical glitches, exports and claim happened in different months. The major challenge lies on ITC refund especially because the process is partly electronic and partly manual which is cumbersome and add to the transaction cost, the exporters’ body said. On IGST, refunds are getting delayed due to airline and shipping companies not submitt…

RBI rushes in to prop up falling rupee

RBI rushes in to prop up falling rupee India’s central bank reportedly intervened in the currency markets on Monday to prevent a further slide in the local unit, which breached the 67 mark to a dollar for the first time in 15 months amid a widening trade gap and runaway import bills fuelled by high crude-oil prices. Some state-owned banks were seen selling dollars aggressively, interventions that market dealers attributed to the central bank’s strategy to stem the decline of the Indian rupee against the US currency. The rupee is the worst performing among a dozen Asian monetary units in the past three months. It lost 4.25 per cent to the dollar during the period, show data from Bloomberg. On Monday, the Reserve Bank of India (RBI) is said to have sold about Rs 800 million collectively on the spot and exchange traded futures markets, dealers said. An email sent to RBI remained unanswered until the publication of this report. The currency market has seen such a strong central bank interven…