Interest eligibility on GST Refunds for Risky Exporters


As per the latest information and news the customs department is suspending GST Refund of some very genuine exporters. This is done on the grounds that some exporters are fraudulently with the help of fake ITC bills are claiming of GST Refunds in case of exports. Therefore, the legality of such refunds withheld by the taxation department and interest implication of genuine exporters in such scenarios needs to be clarified and analyzed to provide a better picture and to make the GST refund process easier.

The GST Council has made it very that the shipping bills for the exported goods that have been filed with the customs department will be treated as a GST refund application in itself, specifically in the case of export where IGST has been paid. Using the GST Refund Module, the custom department will process the shipping bill. The module has been designed to automatically or electronically process the refund application.

Rule 96 of the Central Goods and Services Tax (CGST) Rules, 2017 prescribes and states a detailed procedure for claiming the GST refund on taxes paid by a taxpayer on the exported goods or services or both.

Rule-96(4) has given power to the department to withheld the refund amount. It states that

“The claim for refund shall be withheld where-

  • a request has been received from the jurisdictional Commissioner of central tax, State tax or Union territory tax to withhold the payment of refund due to the person claiming refund in accordance with the provisions of sub-section (10) or sub-section (11) of section 54; or
  • the proper officer of Customs determines that the goods were exported in violation of the provisions of the Customs Act, 1962.”

In cases where no refund is provided or paid to the applicant by the tax department except under the circumstances mentioned under abovesaid rule, the applicant is liable to receive an interest.

Procedure for Identification of Risky Exporters for GST Refunds:

For assuring that the GST Refunds are provided to the right applicant, there is a step by step guide and procedure to identify the risky exporters and to verify whether they have made GST payments or not. The step wise process is as follows-

  1. The automated system identifies the risky exporters based on a pre-defined criteria and grounds. The list of the exporters is then sent by the system to the concerned Chief Commissioner of the Central Tax and Risk Management Centre of Customs (RMCC) departments, respectively.
  2. Once the risky exporters are identified, the GST Officer in the jurisdiction, will verify each and every export consignment transacted by them. He will also check whether the IGST was paid on such exports or not and they have availed eligible ITC on such payments for verifying the true and fairness of the GST Refund claimed by such exporters.
  3. The custom officers will also verify the export consignments of the risky exporters once the RMCC alerts them. The consignment will be given a clearance only when the declared shipping bill and the results of the examination tallies with each other.
  4. Even after receiving a clean chit from the customs officer, the GST refund for the taxes paid on those exports can be suspended or rejected by the Deputy Commissioner or the Assistant Commissioner of the Customs department whose dealing with the refund at the port from where the exports were made. This is done until the eligibility to avail a GST Refund service is not verified by the GST officer in the jurisdiction.
  5. Verification of the claimed GST refund and all other related and completed aspects are to be issued by the GST policy wing of the department. These must be in accordance with the Standard Operating Procedure laid and prescribed in GST laws and rules. This verification is to be send to the Chief Commissioner of the Central Tax.
  6. A report on the said verification is to be furnished to the Chief Commissioner within 30 days by the officer conducting the verification process. The report must clearly specify whether the paid IGST and taxes and the refund claims are applicable or not as per the law.
  7. The Chief Commissioner of Central Tax compiles the reports of all the cases and forwards them to the RMCC and concerned export port of customs within 5 working days of receiving such report.
  8. The custom formation takes necessary action on receipt of the verification report from GST department. Two situations arise here for passing the claim of GST Refund-
  • Cases where no malpractices have been reported:The refund is processed by the customs officer at the port of export to an extent properly verified by the taxation department.
  • Cases where malpractices have been reported: The GST Refund is not processed by the customs officer in such cases.
Author: Anil Agrawal
EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or