Verification Of Igst Refund

As we know, under Goods and Service Tax, export is considered as

‘zero-rated supply’. Any registered person making ‘zero-rated supply’ shall be eligible to claim a refund of IGST by adopting any one of the below two options–

Supply of goods or services under bond or Letter of Undertaking (LUT) without payment of IGST and claiming a refund of the unutilized input tax credit; or
Supply of goods or service on payment of appropriate IGST and claiming a refund of such IGST paid on goods or services.

Refund procedure for option 2, i.e. refund of IGST paid on goods or services exported is comparatively very simple. Vide instruction no. 15/2017-Customs dated 9

th October 2017, it was instructed by the board that the shipping bill filed by the exporter would be considered as an application and no separate application for refund was required to be filed by the exporter. Refund in such case was fully automated, and there were no personnel interferences. Due to the fast track clearance of the refund without any personnel interference, various issues were noted by the board. In order to deal with the issues, the board came up with circular no. 16/2019-Customs dated 17.06.2019 amending the refund procedure and the same has been taken up in the present article. Reasons for amendment in the verification procedure Following are the major reasons because of which the board was forced to come up with the latest circular amending the verification procedure of refund. Dealing with the earlier IGST refund claim, the board noticed that–

There were cases of availment of IGST refund on the basis of fraudulent input tax credit (ITC) claim. The exporters having availment ITC based on the ineligible documents or fraudulently, have utilized the ITC for payment of IGST on goods exported out of India.
There were several cases, wherein, there was a vast difference between the FOB value as declared in the shipping bill and the taxable value as declared in the GST return. Such difference affected higher IGST payout, which resulted in encashment of credit.

Amendment in Verification Procedure

Following are the amendment which has been provided by the board vide above referred circular–

Identification of Suspicious Cases–

- The system, on the basis of set criteria, would identify the risky exporters and shall forward the list of risky exporters to Risk Management Centre for Customs and also to respective Chief Commissioners of Central tax;
- The system shall inform, the past refund issued to such risky exporters, to the Chief Commissioners of Central tax.

Inserting System Alert–

- The Risk Management Centre for Customs shall insert system alert for the risky exporters;
- It would make 100% examination of the export consignment mandatory for such risky exporters;
- Alert shall be placed to suspend IGST refunds in such cases.

Examination/verification of the export goods–

- The customs officers are required to examine/verify the consignment as per the system alert;
- If the examination of the customs officer tallies with the declaration in the Shipping bill and there is no other violation, then, the consignment may be cleared.

Suspension of the IGST refunds–

- In case the examination of the customs officer doesn’t tally with the declaration in the shipping bill or in case of any other violation, the Shipping Bill would be suspended for IGST refunds by the Deputy/Assistant Commissioner of Customs.

Verification by the GST formations–

- The ‘Standard Operating Procedure’ would be laid down by the GST policy wing;
- The Chief Commissioner of Central Tax is required to verify the IGST refund claims as per the ‘Standard Operating Procedure’;
- The GST formation shall provide a report to the Chief Commissioner of Central Tax within 30 days. The report would specify whether the IGST paid and claimed or IGST sanctioned as the refund was in accordance with the GST law or not;
- Lastly, the Chief Commissioner of Central Tax is required to compile and forward the reports of all the cases, within 5 working days, to the Risk Management Centre for Customs and also to the concerned customs port of export.

Further action by customs formations–

- Cases, wherein, no negligence has been reported–

If the Chief Commissioner of Central Tax, after verification, has reported that the input tax credit (ITC) availed by the exporter is correct and is in accordance with the law, then, the Customs officer at the port of export shall proceed to process the IGST refund.

- Cases, wherein, negligence has been reported–

However, if the Chief Commissioner of Central Tax, after verification, has reported that the exporter has fraudulently availed input tax credit (ITC) or has availed ITC on the basis of ineligible document and has further utilized the said ITC for payment of IGST which has been claimed as refund, then, the Customs officer at the port of export will not process the IGST refund.

Back to Learn

Frequently Asked Questions

Common questions about IGST Refund Verification.

The circular no. 16/2019-Customs amends the verification procedure for refund of Integrated Goods and Services Tax (IGST) paid on exported goods or services. It aims to address issues like fraudulent availing of input tax credit (ITC) and discrepancies between the declared FOB value and taxable value, which led to excess IGST refunds.

The major reasons for amending the IGST refund verification procedure are instances of exporters availing IGST refunds based on fraudulent input tax credit claims or ineligible documents, and significant differences between the FOB value declared in the shipping bill and the taxable value declared in the GST return, resulting in higher IGST payouts and encashment of credit.

The system identifies risky exporters based on set criteria and forwards the list of such exporters to the Risk Management Centre for Customs and the respective Chief Commissioners of Central Tax. It also informs them about the past refunds issued to these risky exporters.

For risky exporters identified by the system, the Risk Management Centre for Customs inserts a system alert, making 100% examination of their export consignments mandatory and suspending IGST refunds for such cases.

Customs officers are required to examine and verify the export consignment as per the system alert. If the examination tallies with the shipping bill declaration and there are no other violations, the consignment may be cleared. However, if discrepancies or violations are found, the Shipping Bill would be suspended for IGST refunds by the Deputy/Assistant Commissioner of Customs.

The GST policy wing lays down a Standard Operating Procedure (SOP) for the verification of IGST refund claims by GST formations. The Chief Commissioner of Central Tax is required to verify the claims as per the SOP and provide a report within 30 days, specifying whether the IGST paid and claimed or sanctioned as a refund was in accordance with the GST law or not.

After the verification by GST formations, the Chief Commissioner of Central Tax compiles and forwards the reports of all cases to the Risk Management Centre for Customs and the concerned customs port of export within 5 working days.

If the verification report states that the input tax credit availed by the exporter is correct and in accordance with the law, the Customs officer at the port of export proceeds to process the IGST refund. However, if the report indicates fraudulent or ineligible availing of input tax credit, which was further utilized for IGST payment and claimed as a refund, the Customs officer will not process the IGST refund.

The 100% examination of export consignments for risky exporters is mandated to verify if the goods being exported tally with the declaration in the shipping bill. This helps identify any discrepancies or violations that could lead to excess or fraudulent IGST refund claims.

The amended verification procedure aims to address issues like fraudulent availing of input tax credit and discrepancies in declared values by identifying and scrutinizing risky exporters through system alerts, mandatory examinations, and verification by GST formations. This helps prevent excess or fraudulent IGST refund claims and ensures compliance with GST laws.