Exporters under lens for wrongful claim of tax credits
All these star export houses have availed of Integrated GST (IGST) refundsThis makes it hard for businesses to understate their sales turnover to income tax authorities in comparison to what has been reported in their GST returns
NEW DELHI : Several export houses have come under the regulatory lens for fake tax credit claims and for mismatches in their filings to different tax authorities in a data analysis drill by the Central Board of Indirect Taxes and Customs (CBIC), said a government official.
CBIC has detected wrongful claim of Goods and Services Tax (GST) credits by several exporters and serious mismatches between the data reported by 82 ‘star exporters’ in their filings to income tax, GST and customs authorities. The issue came to light in a data analytics drill covering various regulatory filings by 241 export houses, said a government official, who spoke on condition of anonymity.
CBIC’s probe into the issue has also shown that at least 9 star export houses were ‘non-traceable’ at their premises that are declared on record. All these star export houses have availed of Integrated GST (IGST) refunds. Investigations also revealed that certain exporters have payed GST as low as ₹1650 but have claimed tax refunds worth several crores of rupees. “Investigators are of the view that all such cases involve fake invoicing and fraudulent tax credits, which have been encashed through the facility of IGST refunds," said the official.
The probe shows that the GST and income tax authorities are now working very closely with one another and are sharing regulatory data which helps to raise red flags wherever there are mismatches in the returns filed to the two authorities. This makes it hard for businesses to understate their sales turnover to income tax authorities in comparison to what has been reported in their GST returns. GST authorities are now on a drive to improve compliance by using data analysis to improve revenue collection. Profiling of tax payers using data from various sources enables the officials to identify assessees with a high risk of revenue leakage.
Analysis of data also showed that 40 out of the 241 have shown export turnover of upto ₹1 crore in FY18 and FY19, way below the requirement of $3 million exports to be eligible for the tag of ‘star exporters,’ said the official. CBIC has taken up this finding with the Directorate General of Foreign Trade (DGFT), suggesting that there was a need to make the system of accrediting exporters more robust, the official quoted above said. Star exporters enjoy certain benefits such as reduced customs inspections.
“The present ongoing exercise by Central GST field formations has revealed serious issues in compliance behaviour in some cases. In two instances, their premises were found sealed by the banks as the exporters had been declared as non-performing assets (NPAs)," said the official.
CBIC has suggested that there was a strong case for the DGFT to insist on frequent compliance and verification report from other regulators or require the exporters to produce statutory records of compliance, including certifications from the banks saying they were not NPAs.
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