It appears post-GST hurdles, especially IGST filing and refund claiming, are still playing one of the major roles behind declining growth of exports and subsequent employment generation if the analysis and prognosis provided by Mr Ganesh Kumar Gupta, President, FIEO and Mr Ajay Sahai, CEO & DG of FIEO at a jam-packed press conference held on May 29 in New Delhi are taken into account. Interestingly, on May 30 the Ministry of Finance, Government of India announced immediate interim measures pertaining to IGST and ITC refund starting from May 31 to June 16.
According to the statement issued by the Ministry of Finance, till now, the Government has sanctioned more than Rs 30,000 crore as GST Refund. This includes an amount of Rs 16,000 crore of IGST and Rs 14,000 crore of ITC. The figures of ITC include sanction by both the Central and State Governments. Contrary to the press reports that there has been a dip in refund sanction after the first Refund Fortnight in March 2018, the refund sanctioned during May 2018 is to the tune of Rs 8,000 crore. Refund claims to the tune of Rs 14,000 crore (Rs.7,000 crore on the IGST side and Rs 7,000 crore on account of ITC) are pending with the Government as on date, as against the figure of Rs 20,000 crore projected by FIEO at the press conference. In order to liquidate the pendency, Government is starting a second “Special drive Refund Fortnight” from 31st May 2018 to 14th June 2018. This time the “Special Drive Refund Fortnight” would facilitate all types of Refund claims in which Customs, Central and State GST officers will strive to clear all GST refund applications received on or before 30.04.2018. This will include refunds of IGST paid on exports, refunds of unutilized ITC and all other GST refunds submitted in FORM GST RFD-01A.
The Central Board of Indirect Taxes and Customs (CBIC) is implementing a solution whereby the refunds held in GSTN, in cases where the exporters have mistakenly declared their export supplies as domestic supplies, would now be transmitted to Customs EDI System. A Circular No 12/2018 dated 29-05-2018 has been issued in this regard. On receipt of the records from GSTN, the Customs System would automatically process the refunds for sanction, if no other errors are committed by exporters.
Circular No 45/19/2018-GST has been issued on 30-05-2018 clarifying matters related to refund claims by an Input Service Distributor, composition dealer, exports of services and supplies made to SEZ. The circular also clarifies issues related to requirement of LUT in cases of export of exempted or non-GST goods and scope of restriction imposed under Rule 96(10).
All claimants may note the refund application in FORM GST RFD-01A will not be processed unless a copy of the application, along with all supporting documents, is submitted to the jurisdictional tax office. Mere online submission is not sufficient.
All GST refund claimants are encouraged to approach their jurisdictional tax authority for disposal of any of their refund claims submitted on or before 30.04.2018, which are still pending. In case the jurisdiction (i.e. Centre or State) has not been defined for a particular claimant, he/she can approach either of the jurisdictional tax authorities.
According to Mr Gupta, despite increasing protectionism, global economic growth is looking promising in 2018. Indian exports, which are hovering around USD 300 billion, should exhibit 15-20 per cent growth so as to reach around USD 350 billion during the current fiscal. The northward movement in petroleum and commodity prices would also add to export growth. The recent depreciation of Indian Rupee is also supporting exports though its impact varies from sector to sector and from company to company.
However, there are some gray areas. The FIEO president maintained that liquidity is a major area of concern particularly for MSME exporters who constitute the bulk of exports in high employment intensive sectors. “The challenges on GST front are continuing though the fortnight clearance drive, which was highly successful, gave us the hope that refund will be provided on real time basis. While claims over Rs.7000 crore were cleared during March, 2018, the amount in April, 2018 is little over Rs.1000 crore. As per our estimate, refund over Rs.20,000 crore are pending on account of IGST and ITC and many exporters have not been able to file the refund of ITC due to technical glitches as input tax credit and exports happened in different months. The GST refund process has considerably slowed down after the clearance fortnight,” Mr Gupta pointed out. “Apart from technical hitches the refund process became cumbersome because of following cumulative refund system for a certain period instead of monthly refund system followed earlir. Here whole period suffers because of any error happens in a particular month,” added Mr Sahai. Accordingly, FIEO urged the Finance Minister to look into the refund problem and organize a clearance drive to liquidate the pendency and bring the refund process on track.
Major Issues on ITC and IGST Refund
- The manual intervention in the refund process has added to the transaction time & cost of exporters.
- The process of ITC refund is partly electronic and partly manual which is cumbersome and add to the transaction cost.
- The tax authorities are reluctant to accept the applications and raise piecemeal objections asking for irrelevant documents including copy of bank realization certificate.
- The refund formula to apply for refund for a relevant period has not been modified in the software with the result a large number of exporters could not file their claim for ITC refund.
- The tax authorities have not been trained in GST Law, Rules & Regulations delaying the refund of exporters. The process which requires the State Authorities to process the refund of SGST and forward it to Central Authority for payment of CGST and vice-a-versa is quite time consuming. In many cases, while one authority has sanctioned the component of tax under its jurisdiction, the other authority either delayed it or yet not issued it.
- The problem of refund of IGST at ICD continues. The EGM, if incorrectly filed by the shipping lines, delay the refund process. In many cases, when shipping companies file the correct EGM, ICEGATE reject such EGM. The exporter is tossing between customs and shipping lines.
- Government should accept the onboard copy of bill of lading and clear the IGST refund as has been done for invoice error.
- The Refund for Exports from Non-EDI Ports has not yet started which is affecting India’s exports to its neighbouring countries particularly Nepal & Bangladesh.
- The IGST refund has slowed down after March, 2018 and most of the exporters are waiting for their IGST refund for the month of April or even for a prior period.
- In many cases, the drawback rate (both higher & lower) is the same. While one rate is given in Column-A the other is given in Column-B. If exporter has wrongly mentioned A, the GST refund for the month of July-Sept is denied while the exporter has not claimed higher drawback
- The GST data was hitherto being captured on monthly basis but from February onwards, the same is captured on cumulative basis. Therefore, if there is an error in GST return for any month, the cumulative figure will also be incorrect. With the result, the refund to such exporters has virtually dried from February 2018 onwards.
- The error in GSTR-3B has not yet been allowed to be rectified affecting the refund for the exports.
Mr Gupta also maintained that Indian exporters need to identify the champion sectors and provide them fiscal and non-fiscal support so that they can increase their exports both in advanced and emerging economies. A product market mix strategy will help in increasing exports exponentially.
In addition, FIEO feels that Government will pro-actively engage with trading partners particularly with US so that the trade interest of the country is safeguarded.
Mr Gupta also expressed serious concern on declining job opportunities in export sector. “While growth in exports in 2017-18 has helped in creating additional jobs in the sector, the performance of some of the labour intensive sectors like apparel, leather, carpets, handicraft, gems & jewellery, etc. has definitely dented the job creation opportunities in these sectors,” he said.