The finance ministry has identified 1,474 ‘risky’ exporters who have fraudulently claimed IGST refund worth Rs 2,020 crore and promised stern action against them. Some of these exporters enjoy a star rating, according to a senior ministry official. The fraudulent claims were caught out during a verification exercise which found exporters’ untraceable, following which their refund claims have been blocked, the official added.
Integrated Goods and Services Tax or IGST refund has been suspended in all such cases where an adverse report was generated post verification of the exporter or his suppliers. However, Customs officials have been sensitized to expedite refunds to genuine exporters keeping the Covid-19 challenges in mind, the officer quoted above said.
“Out of the 1,474 untraceable exporters, 1,125 exporters are from Delhi alone. Non-existing exporters have also been detected in large numbers at Surat (215), Thane (28), Faridabad (15) and Kolkata (11),” the official said.
They were engaged in exports of a wide range of products including ready-made garments, wallpaper, wall coverings, leather apparel, smoking pipes, mobile phones, cigarette holders, footwear, plastics, floor coverings, ball bearings and roller bearings.
Seven of these dubious business firms had star exporter ratings, five of them operated from Delhi and one each from Mumbai and Kolkata.
Three adverse reports have been received in respect of other three star exporters, two in Mumbai and one in Jaipur. They tried to claim IGST refund amounting to Rs.28.9 crores unsuccessfully.
The ministry started a programme for exporters’ risk management in June 2019 following assessment of fraudulent claims taking advantage of the fully automated IGST refund system. Their general modus operandi is to pay IGST at the highest rate of 28% in order to quickly encash the undue ITC claims, the official said.
However, the programme uses data analytics based on 360 degree profiling of exporters using multiple data sources (GST, Income Tax, Customs, DGFT, etc.) and is able to weed out fraudulent exporters from genuine ones with a high degree of success, he said.
“Some fake/risky exporters are lobbying with some prominent trade associations to allege that genuine exporters are being harassed by being asked for over 1,500 documents each for conducting verification, but this is completely untrue,” he said, adding that the two stage verification doesn’t require more than three to four documents.