Refund of Exports on Payment of IGST – Still the best method to get refunds?

Exporters of goods and services as well as suppliers to SEZ units are now getting GST refunds automatically from the department. Under GSTN as per section 16(3) of the IGST Act, 2017 two options are available for refund on account of ‘Zero-rated’ supplies, either through letter of undertaking (LUT) or through charging IGST in Exports Invoices. Currently, the facility of automatic refund is available for those exporters who paid Integrated Goods and Services Tax (IGST), through customs mechanism. However, this method is easy and fast, still the assessees are facing some problems due to unawareness about the procedure and carelessness while filing the GST returns and Shipping Bills. In this post we are discussing a few problems arising during such refunds and there probable solutions.
Problem No. 1 – “Earlier I was receiving the refunds but now they have stopped”
Earlier the exporters were getting regular refunds but recently various frauds were identified by the GST department in such IGST refunds where the exporters received these refund on the basis of fake Invoices’ ITC. Nationwide searches were conducted by the department of CGST and Customs and fraud of approx.. 1200 crore was unearthed. In this process the department marked more than 10000 exporters as risky exporters at various ports. Those exporters’ refund and Duty Draw Back were withheld by the GST systems.
Till now, there was no process of resolving this tag of risky exporter and the exporters were unaware what to do. Then a circular No. 22/2019 dated 24.07.2019 was issued by the department where the CGST field formations i.e. jurisdictional range in the city of registration of the exporter was to conduct an investigation into the ITC and exports of such exporter. Based on their report the hold will be removed by the customs department. However, the field formations were not receiving any such intimations in this regard and exporters were helpless due to this problem. But now the field formations have started receiving information from the customs and have started this process. After such Investigation by the department a report is being shared by them with the customs authorities who on receipt of a satisfactory report Customs department is now issuing refunds and drawbacks. Thus it is advised to all the exporters whose refunds are withheld by the department even after processed status to reach out to their field formations for getting such investigation done from them.

Problem No.2 – “I filed my GST returns but not getting refund?”

Solution: The IGST refund would not be processed if it fails any validation at the level of either GSTN or Customs system. Validations are:
i) Both GSTR 1/Table 6A and GSTR 3B have not been filed for that supply or there are missing invoices in GSTR 1 for that supply.
(ii) Invoices provided in Table 6A of GSTR 1/1E are incomplete, e.g., details of shipping bill and port number/code are not mentioned.
(iii) IGST paid under Table 3.1(b) of GSTR 3B being less than total IGST claimed in Table 6A of GSTR 1/1E of the same period. The claim cannot be more than that of the amount of IGST paid
Correction: – Correction of errors need to be done in the GST return filed. Table 9A has been provided to carry out those amendments in the Invoice.
In case if the refund is stuck due to incorrect filing of return (i.e. filing of turnover in para 3.1
(a) (i.e. Domestic sales instead of para 3.1 (b) (i.e. Zero rated sales)), then the assessee needs to approach the customs department in terms of Circular number 25/2019-Customs dated 27th August, 2019 r/w Circular No. 12/2018- Customs dated 29.05.2018. Once the tax paid amount matches in GSTR-1 and 3B then the GSTN transfers the data to the Customs ICEGATE portal for further verification. If the exporter finds that even after the correct filing of return and transmission of data to GSTN, there may be further errors in the shipping bills and Invoices due to which the refund might have been stopped by the Customs authorities.

Problem No.3 – “I have filed correct information in GST return but still my refund is not sanctioned?”

Solution: The matching of data by Customs systems can have following errors (These errors can only be viewed after creating a login at ICEGATE portal. The Customs department in the month of June, 2019 sent the automatic login credentials to all the exporters on the mobile number and email ID registered with them. However an assessee can also get himself registered separately if such details were not received to him.):

This occurs due to clerical error made by exporter, mentioning of wrong shipping bill number furnished in GSTR 1/Table 6A, which can be rectified by making amendments in GSTR 1 by using Form 9A.

Exporter has to approach their shipping line/airline/carrier to file Export General Manifest (EGM) immediately.

This error occurs when GSTIN declared in the shipping bill does not match with the GSTIN mentioned in the corresponding GST return. In this case too, the exporter has to make necessary changes in GSTR I by use of amendment Form 9A. Exporters should note that there is no provision of amendment in the shipping bill once the EGM is filed.

This error occurs due to duplicate/repeat transmission of shipping bill – invoice record from GSTN. The previous transmission would have already been validated for IGST refund by ICES. NO action is required here.

This one is the most common and repeated error committed by the exporters, occurs due to mismatch of invoice number as mentioned in the invoice table of the shipping bill and that of mentioned in the GSTR 1 for the same supply. This happens due to:
(i) The typographical mistake while entering data in GSTR 1 or the SB.
(ii) The exporter uses two sets of invoices, one invoice for GST and another invoice for exports resulting in mismatch of invoice numbers.
As per the GST procedures, the invoice number shall be matched with GSTN to validate exports and IGST payment. There should not be any difference between commercial invoice and GST invoice. IGST is to be paid on the actual transaction value of the supply between the exporter and the consignee, which should be the same as the one declared in the commercial
invoice. If the error SB005, is due to a data entry (typographical) mistake in GSTR 1, it can be amended in Form 9A. But once EGM filed, SB cannot be amended. Also, if the exporter has used a separate invoice in the Shipping Bill, he cannot include that in his GSTR 1 in lieu of his GST invoice. Thus, SB005 error, as of now, cannot be corrected by any amendment either in GSTR 1 or in the shipping bill.
It is advised that the exporters should take care so as not to repeat such mistakes in future and ensure that the same GST compliant export invoice is declared at both ends For these cases, a mechanism is being considered by the Board to make the requisite corrections manually in line with the recent amendments in Rule 96 of the CGST Rules, 2017. The said mechanism is explained in Circular No 26/2019 – Customs dated 27.08.2019, for Shipping Bills filed upto 31.07.2019, where customs department can be reached to manually correct the errors and issue the refund. It may, however, be noted that these interim workarounds shall only be available as a one-time measure for the past SBs.

This error occurs, in case of exports through Inland Container Depot (ICD), if the gateway EGM is not filed electronically or it contains some error. It is noticed that gateway EGM in case of many ICD shipping bills have been manually filed, leading to such refunds not being processed. While the Customs at gateway ports are pursuing this matter with the shipping lines, the exporters can also approach their shipping line to file the EGMs electronically.

This error comes when all the constraints like GST1N, SB number, invoice number etc. match between GSTN and Customs databases. This code states that the SB is ready for inclusion in the IGST refund scroll. But it may happen in some cases that SB does not appear in the refund scroll. This could be due to:
(i). The exports might have been made under bond or LUT, hence not eligible for refund.
(ii). If a shipping bill covers multiple invoices, few of the invoices might have been successfully validated and other invoices might have some errors
(iii). Composite rate of drawback claimed for such shipping bill during transitional period between 01.07.2017 to 30.09.2017, thus making shipping bill ineligible for IGST refund.
(iv). Where the IGST claimed amount is less than Rs 1000/-.

When this type of error occurs approach to EDI section at gateway port customs with correct bank account number, bank name, bank address and IFSC code.

CA RANJAN MEHTA
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