Refund of GST on exports

Anjlika Chopra, Sr Director, Ankita Gala, Manager, Deloitte India




Exports are a key contributor to India’s GDP (48.8% of the GDP in 2015). India’s exports in 2016 were valued at USD 264 billion, with manufacturers being the largest contributors (68.4% of exports).

Services exports sector in India is the fastest growing sector of the economy. On the other hand, India’s imports in 2016 were USD 359 billion. This indicates the significant scope and need for growth in exports. There is invariably a rising need to encourage exports and enable ease of doing business in the export market.

Central Government vide tax refund mechanisms, drawback procedures, Export Oriented Units ‘EOU’, Special Economic Zones ‘SEZ’, Free Trade Warehousing Zones ‘FTWZ’, issuance of scrips and various other exemptions, promotes exports.

Provisions of Central Goods and Services Tax Act ‘CGST’, Integrated Goods and Services Tax Act ‘IGST’ and respective States/ Union Territory’s Acts introduced from July 1, 2017, have been largely exporter-friendly, allowing zero-rated outward supplies along with availment of full Input Tax Credit ‘ITC’ on inward goods/ services received and refund of unutilised ITC.

The Central Government w.e.f. October 10, 2017 initiated the processing of GST paid on export of goods/ services outside India. All efforts had been taken to support the exporters who earn foreign exchange and provide significant employment especially in the small and medium sectors.

Claim for refund generally arises on account of zero rated supplies/ deemed exports, accumulated ITC on account of inverted duty structure, etc.

I. Exporter can claim refund under either of the following options:

Option 1- Refund of unutilised ITC

Exporters could supply goods/services under bond or Letter of Undertaking, subject to prescribed conditions, without payment of IGST and claim refund of unutilised ITC on procurements received from vendor/s; or

Option 2- Refund of net IGST paid by the exporter

Exporters could supply goods / services on payment of net IGST (post utilising ITC paid on procurements) and claim refund of net IGST

II. Common errors leading to failure of sanction of refunds:

a) Mismatch in the shipping bill number as reflected in GSTR-1 and ICEGATE

Exporters must ensure correct reporting of shipping bill number, shipping date and port code in Table 6A of GSTR-1 vis-à-vis details of ICEGATE. A large number of refund applications could not be processed owing to such mismatches. Shipping bill can be viewed online through ICEGATE to avoid failures.

b) Mismatch in the GSTIN as reflected in shipping bill with GST returns

Exporters must ensure correct reporting of GST Identification number in shipping bills to ensure no mismatch.

c) Mismatch of invoice value, taxable value and IGST paid in shipping bill vis-à-vis GST returns

Exporters must ensure correct values of invoice value, taxable value and IGST amount as shown in Table 3.1 of GSTR-3B (Simplified return) and Table 6A of GSTR-1 (return for outward supplies). Aggregate IGST amount claimed in GSTR-1 should not be greater than that shown in GSTR-3B. If there is any mismatch, exporters must rectify the same in the GSTR-1 of subsequent month. Circular issued by Government reported that only 32% of refund details have been transmitted from GSTN portal to ICEGATE, implying that rest of 68% of refund claims are held up due to insufficient information.

d) Non-filing or incorrect filing of Export General Manifest (‘EGM’)

Due to either mismatch in information furnished in EGM vis-à-vis shipping bill or non-filling of EGM, the conditions for grant of refund remain unsatisfied. Further, Gateway EGM is unable to match details in certain cases where EGM is manually filed. Exporters were given a facility to file supplementary EGM online for exports made in July, 2017 by October 31, 2017. For subsequent months, online filing of EGM is advisable.

e) Incorrect bank account details given to Customs authorities

Exporters must ensure that, bank account details available in the Customs portal are correct and validated by Public Financial Management Systems.

III. Steps initiated by Government to facilitate sanction of refunds

In addition to timely issuance of circulars/ press release to educate/ guide exporters on refund procedure and precautions to avoid any mismatches and errors, the Government has introduced an alternative mechanism which envisages an officer’s interface where exporters have to additionally submit the given concordance table:

GST Return

Shipping Bill

Final

Sr. No

GST invoice number

Taxable value

IGST paid

Sr. No

Corresponding Shipping Bill invoice number

Taxable value

IGST Amount

Actual IGST amount on Export

 

 

 

 

 

 

 

 

 

On verification of the data from both systems, the officer can edit the IGST details paid in case of short shipment or incorrect calculation by exporter and accordingly, sanction the actual refund amount post thorough verification.

Given the above mechanism, it is evident that the Government is keen to ensure that all the exporters get their refunds sanctioned at the earliest to avoid blockage of working capital.

 

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Disclaimer: Above expressed are the personal views of the author, and the publisher or the author disclaim all, and any liability and responsibility, to any person on any action taken on reliance of it.