CBIC issues instructions on the procedure for sanctioning IGST refunds withheld in accordance with Rule 96(4)(c), which are transmitted to the jurisdictional GST authorities in accordance with Rule 96(5A) of the CGST Rules, 2017. The SOPs on procedure for verification of risky exporters and their suppliers are rescinded/superseded by these Instructions.
CBIC GST Instructions 04/2022 dt. 28/11/2022: Sanction procedure for IGST Refunds withheld under CGST Rule 96(4)(c), transmitted to jurisdictional GST authorities under CGST rule 96(5A)
1. As per the SOPs dt. 23/01/2020 and 20/05/2020 regarding procedure for verification of risky exporters and their suppliers DGARM would identify exporters and their suppliers based on risk parameters approved by the Competent Authority and forward the list to the Risk Management Centre for Customs (RMCC) for alerting the system. In such cases, Customs field formations were required to conduct a thorough examination of the identified exporters’ goods. These SOPs prescribing the procedure to be followed for verification of risky exporters and their suppliers are rescinded/superseded by these Instructions.
2. However, CGST Rule 96 has been amended retrospectively from 01/07/2017 to provide for withholding of IGST refund in cases where the verification of the exporter’s credentials, identified through data analytics, including the availment of ITC by the exporter, is considered essential before grant of refund. CGST Rule 96(4)(c) provides that the Commissioner in the Board or an officer authorised by the Board determines, based on data analysis and risk parameters, that verification of the exporter’s credentials, including the availment of ITC by the exporter, is required before granting a refund in order to protect revenue interests.
2.1 As a result, CBIC has authorised the Principal Director General/Director General of the DGRAM, CBIC, New Delhi, to exercise the functions under CGST Rule 96(4)(c), vide GST Order 01/2022 dt. 21/07/2022.
2.2 New CGST Rule 96(5A) provides for the transmission of IGST refunds withheld in accordance with CGST Rule 96(4)(c) as system generated refunds in Form GST RFD-01. Furthermore, new CGST Rule 96(5C) provides that such system generated refunds in FORM GST RFD-01 must be dealt with in accordance with rule 89, i.e. in the same manner as other GST RFD-01 refund claims.
3. In light of the aforementioned amendments, certain changes have been made to the alert module on ICES, for which DG Systems has issued an Advisory No. 14 dated 29/09/2022 to all system managers. In the said advisory, officers of DGARM were informed, among other things, that a new role for putting an all-India suspension, either on the IEC or GSTIN of the exporter, to withhold IGST refunds had been developed. DGARM officers can also revoke the alert. Furthermore, DG Systems issued instructions to Customs field formations on 29/09/2022 regarding the procedure to be followed in respect of IGST refunds withheld due to DGARM alerts on risky exporters.
4. Based on data analysis and risk parameters, DGARM would identify exporters where verification of the exporter’s credentials, including the availment of ITC by the exporter, is considered necessary before granting a refund. DGARM would then place an all-India alert on such exporter on the Indian Customs EDI system, along with the reasons for the alert. Once an alert is placed on an exporter, the IGST refunds of such exporters will be withheld, and the data in respect of Shipping Bills filed by such exporter, for which IGST Scroll could not be generated due to DGARM alert, along with the reasons thereof, will be transmitted to GSTN through ICEGATE for generation of refund claims in FORM GST RFD-01 in accordance with the provisions of CGST Rule 96(5A). Furthermore, previous cases where the exporter was identified as risky and could not be processed due to pending verification or receipt of a negative report would be transmitted to GSTN via ICEGATE for generation of refund claims in FORM GST RFD-01 in accordance with the provisions of CGST Rule 96(5A).
5. Such refund claims will be made available to the jurisdictional proper officer on the back-office system under the category “Any other (GST paid on export of goods)” with the remarks “Refund of IGST paid on export of goods (Refund not processed by ICEGATE)”. Furthermore, the risk parameters based on which the exporter was identified as risky by DGARM would be shared with the jurisdictional tax officers, along with the system generated refund claim in FORM GST RFD-01. If the jurisdictional CGST authorities have already submitted the exporter’s verification report to DGARM, the details of the same will be shared with the jurisdictional proper officer, along with the said system generated refund claim in FORM GST RFD-01. Transmission of such IGST refunds to the jurisdictional proper officers, which had been withheld due to DGARM’s identification of the exporter as risky, is being initiated on the portal.
6. Upon receipt of such refunds, the jurisdictional proper officer shall immediately process such refund claims in the same manner as other RFD-01 refunds filed under the provisions of Rule 89 of the CGST Rules, 2017.
7. It should be noted, however, that because these refund claims were generated by the system based on Shipping Bills/Bills of Export filed by the exporter, they would be auto-acknowledged by the system and no Deficiency Memo in Form GST RFD-03 could be issued against such system generated Form GST RFD-01 refund claims.
8. The proper officer shall ascertain the genuineness of the exporter, verify the correctness of the exporter’s availment and utilisation of ITC, and exercise due diligence in processing the said refund claims to protect revenue interests. If necessary, the appropriate officer may conduct physical verification of the exporter’s places of business to ensure that the exporter is present and functional/active at his declared place of business.
9. In accordance with GST Instruction No. 03/2022 dated 14/06/2022, the proper officer shall issue a detailed speaking order in respect of the refund claim and shall upload it, along with the refund sanction order, in Form GST RFD-06 on the portal. The officer will also adhere to the timelines for processing the refund claim set out in Section 54(7) of the CGST Act. It goes without saying that the review and post-audit procedure outlined in these instructions will also apply to such refund claims.
10. In cases where a detailed investigation of the exporter or his suppliers is required to verify the genuineness and correctness of the ITC claimed by the exporter, the matter may be examined, if necessary, for resorting to the provisions of Section 54(11) of the CGST Act, 2017 for withholding of the refund.
11. In addition, the proper officer would be required to provide feedback on the common portal while issuing refund sanction orders in FORM GST RFD-06, as well as a recommendation as to whether the alert against the said taxpayer should be continued or removed. The functionality for this would be available on the system in due course.
12. GSTN shall transmit to DGARM the data regarding the outcome of refund processing by the proper officer, as well as feedback received from the proper officer on the requirement of removal or continuation of alert, for necessary action for removal or continuation of alert.
13. The Zonal Principal Chief Commissioners/ Chief Commissioners shall closely monitor the progress of the disposition of such transmitted refund claims to ensure that due verification has been conducted before sanction and the refunds have been processed in a timely manner.