GST fraud: 1,377 exporters, 10 ‘star exporters’ go untraceable after illegally claiming crores in refund

Exporters are identified as ‘risky’ on the basis of specific risk indicators based on Customs, GST, Income Tax and DGFT data.

As many as 1,377 exporters have fraudulently claimed IGST refund amounting to Rs 1,875 crore, sources in the indirect tax department said. They added that there are at least 10 ‘star exporters’ among these who have illegally availed of Rs 28.9 crore in refunds.  “These exporters have been found untraceable at their principle place of business,” a tax official said.

Star Export House exporters are certified by the government on the basis of export performance (Rs 15 crore to Rs 5,000 crore FOB in the current and three preceding years). They are extended certain benefits including customs clearance on self-certification basis and exemption from furnishing bank guarantee under certain schemes.

Sources said that 7,516 exporters have been put on the ‘risky’ exporter list as on date. Out of these, 2,830 exporters are being currently denied IGST refund and drawback facility worth Rs 1,363 crore. Further, adverse reports have been received in respect of 2,197 risky exporters.

Exporters are identified as ‘risky’ on the basis of specific risk indicators based on Customs, GST, Income Tax and DGFT data. The identified risky exporters are shared with the CGST formations for physical and financial verification in terms of the standard operating procedure (SOP) laid down by the GST policy wing.

Further, after receiving positive reports from field formations on 695 exporters, the Directorate General of Analysis and Risk Management (DGARM), in its supply chain analysis, found that their suppliers had availed ineligible credit. In 461 of these cases, IGST refund and drawback amounting to Rs 273 crore is under suspension, sources said.

Earlier in the year, the government had found that in some instances an exporter with over Rs 50 crore of exports of readymade garments has taken refund of Rs 3.9 crore while the entity’s total GST payment in cash was a mere Rs 1,650. In another case, tax payments in cash were Rs 51,201 while the exporter obtained refund of Rs 9.59 crore.

Sources said that such cases involve fake invoicing and fraudulent tax credits, which have been encashed through the facility of IGST refunds. The finance ministry earlier this year had asked DGFT to continuously (or annually) seek a compliance and verification report from other regulators or obligate the exporters to produce statutory records of compliance, including certifications from the banks of “No NPAs”.