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GST fraud: Star exporter paid tax Rs 1,650, took refund of Rs 3.9 crore

FE Bureau
GST fraud, Star exporter, IGST refunds, GST payment, DGFT, CBIC,  star export houses

The revenue department has asked the Director General of Foreign Trade (DGFT) to make the system of accrediting exporters with 'Star' tag more robust since such exporters enjoy many facilities, including reduced customs inspections. The department based the advice on preliminary findings that some 'Star' exporters were fraudulently availing IGST refunds.

"There are instances where 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 Rs1,650. In another case, tax payments in cash were Rs51,201 while the exporter obtained refund of Rs9.59 crore.

It is believed that such cases involve fake invoicing and fraudulent tax credits, which have been encashed through the facility of IGST refunds," another official said. It further said there was a strong case for 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".

FE had reported last week that the revenue department had red-flagged nearly 250 'star' exporters after its data analytics system found them to be 'risky'-which means that they could be availing higher refunds than their legal entitlement through fake invoices. The refund for these exporters has been blocked pending verification.

Star Export House exporters are certified by the government on the basis of export performance (Rs15 crore to Rs5,000 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.

"Of the 241 cases taken up for detailed scrutiny, data of 82 star exporters show that declarations before income tax and GST are at significant variance. Data matching between income tax and GST of the star exporters has also shown that 40 out of 241 entities have declared turnover from business ranging from NIL to less than Rs1 crore in FY17-18 and FY18-19, whereas it is understood that an exporter must maintain exports of $3 million in a year to be eligible for the status," the department said in a letter to DGFT.

Official sources said the indirect tax department (CBIC) has extensively used data analytics using information furnished by the taxpayers to income tax, GST and customs department to identify risky exporters. Ongoing investigations have thrown up at least 9 star export houses as'non-traceable' at their premises declared on record. All these star export houses have availed IGST refunds, which is now being questioned by the tax officers, sources added.