Un-resolved Issues of the Exporters in GST Regime

Transcription

1 Unfrtunately, exprters are receiving ends at all times irrespective f the facts which gvernment rules the cuntry, since the schemes and plicies are made by the fficials f tw different ministries, which never cincides with the bject f the Gvernment. In spite f the fact that India is ne f the Cuntry wh is the part f WTO Agreement, whereby it is agreed that n taxes t be exprted and there shuld be level playing fields amngst all exprters in the wrld. Hwever, prir t implementatin f GST and 101 Cnstitutinal Amendment Act, there were different taxes, which were impsed by Central Gvt, State Gvt., lcal bdies and therefre any plicy declared by Ministry f Cmmerce in Freign Trade Plicy was restricted t either exemptin f taxes r refund f taxes. Still all the State Gvernments had the plicy t exempt VAT / Sales Tax n exprts and allw 100% credit / set ff fr their inputs, but taxes levied by lcal bdies were always subjected t cst and these were getting exprted via cst. There was always a difference in the plicy annunced by Ministry f Cmmerce and ntificatins issued by the Department f Revenue either giving refund / exemptins r time gap, but exprters are suffering during the pre-gst regime als. Each exprter was expecting that such gap which was prevailing in pre-gst Era will vanish and the methdlgy will be adpted at par with ther cuntries, but this has becme the dream and the time has cme t say that earlier practice was better than current ne in GST Era and nt n accunt f GST Act, but the prvisins made in the rules r prcedure issued by way f a ntificatin r circular are different, which decides the fate f exprters. Further restrictins and travel twards the bad fate f the exprters are made thrugh the technlgy develped by GSTN and ICE Gate w.r.t. nnadhering t the prcedure prescribed in the rules / prvisins f the act and bugs in the system. Attempt has been made t highlight the areas, where there is a difference and n accunt f such difference, exprters are suffering frm 1 st July nwards and huge amunt has been lcked up in wrking capital and thereby becming nncmpetitive in the internatinal cmpetitive market and there is n level playing field as cmmitted by India thrugh signing WTO agreement. 1. Date f Implementatin Thugh GST Laws were enacted in the mnth f Feb 2017, the implementing date was ntified n 1 st July Ntificatins under GST Law w.r.t. imprts and exprts were issued n and the Circular was issued fr giving the LUT / Bnd and prcedure fr exprting n payment f duty under the claim f refund n 4 th July Whereas, this time gap als made all exprters t suffer. Hwever, amendments in freign trade plicy cnsidering the changes in GST Regime was made in Trade Ntice N. 11/ dated the 01/07/2017 withut issuing ntificatin t amend freign trade plicy and new freign trade plicy was declared n 5 th Dec Special Ecnmic Zne Sectin 16 f IGST Act 2017 prvides that supply t SEZ Develper and SEZ unit are zer rated supply and Sectin 7 f IGST Act 2017 clearly prvides such supply will be cnsidered as inter-state supply. Supplies are made t SEZ Develpers r SEZ Units will be either withut payment f IGST under LUT r n payment f IGST under the claim f refund, but the trade & industry was nt made aware that such supplies als t be cvered under LUT and therefre there was a prcedural lapse. Even the service prvider t SEZ Develpers / SEZ Units have supplied withut payment f IGST

2 withut submissin f LUT. Further, number f small suppliers f gds / services r bth have nt btained the registratin and they have supplied the gds r services r bth t SEZ, whereas they need t btain the registratin whenever they d inter-state supply withut any threshld limit. Further, since there was n clarity, when any persn having SEZ & DTA in the same state then they have taken the single registratin either thrugh migratin prcess frm ld number t new number f VAT Registratin. Since it was aut-migrated, n system was develped by GSTN t take separate registratins fr such unit which was prvided n and therefre number f SEZ have t receive the gds with payment f GST till that time. Further, Sectin 7 f SEZ Act 2005 & Rule 27 f SEZ Rules 2006 have nt been amended s far and therefre the exemptin s far availed f IGST payment will be unnecessarily in the litigatin cnsidering prvisins f Sectin 51 f SEZ Act 2005, which has verriding effect ver any ther law f the land f the India. Further, earlier cntractrs f SEZ Develper & Unit were entitled fr exemptin but in the GST Regime are nt entitled fr such exemptin f custm duty and IGST. 3. Interface f GSTN with ICE Gate: GSTN prvides fr tax invice and tax invice is used fr uplading GSTR-1, whereas shipping bill dentes cmmercial invice number and therefre exprters culd nt get the refund even thugh they have paid IGST n exprts under the claim f refund against the Tax Invice. There was a mismatch f tax invice number appearing in GSTR-1 and number reflected in shipping bill. ICE Gate system shuld have allwed t incrprate tax invice number n shipping bill als in the clumn prvided fr ARE-1 in shipping bill and therefre exprters had t file cncrdance table t the Annexure A as given in the circular n. 5/2018 Cus dtd and therefre mst f the exprters were deprived f btaining the refund claim under Rule 96 f CGST Rules 2017 f IGST paid by them n exprts frm the perid f 1 st July 17 till almst in the mnth f March 18. Further IGST has t be paid n transactin value, which may be n ex-wrk basis, FOR, FAS, FOB, C&F, C&I, CIF, Dr delivery etc. and in accrdance with Sectin 15 f CGST Act 2017, GST will be payable n transactin value and nt nly n FOB value, whereas refund is denied when IGST paid is mre than tax t be paid n FOB value. There is n mechanism t get the differential amunt either in electrnic cash ledger r electrnic credit ledger maintained by GSTN and therefre exprters at lss n duty paid n such difference i.e. transactin value FOB value. Even exprters have received the demand alngwith interest. Since, there is n direct interface thrugh electrnic mde between ICE Gate and GSTN, reprt generated by each f them and shared by each f them is nt accessible t the taxpayer and it creates lt f interface with gvt. fficials which was nt envisaged. Albeit, such infrmatin can be availed by the taxpayer nly after ding the necessary lgin f ICE gate which itself is the difficult task by itself. Even number f exprters have fllwed up with ICE Gate helpdesk as well as GSTN helpdesk but in vain, still they are struggling t get their refund and remain at the mercy f the gvt. fficials. There are number f cases, where such crrectins were made in the said annexure as mentined abve and

3 upladed. Still there are n respnses either frm custm ffice r GSTN and exprters have been deprived f the refund frm the mnth f July 17 nwards. 4. Prvisins in the Act & Rules / Ntificatins and amendment theref vis-à-vis system design f GSTN: Peridicity f filing the Refund under Rule 96 & Rule 89: In accrdance with the prvisins f the Act & Rules the taxpayer can file refund claim n any peridical basis i.e. mnthly, bi-mnthly quarterly, half yearly r yearly. Hwever, in accrdance with the system, refund has t be filed n mnthly basis. System is verriding the prvisins f Rules & Act: a. Prvisins f Act & Rules d nt stipulate t grant the refund f duty n minimum f the fllwings, whereas, rule des nt prvide such limitatin. Amunt f refund applied as per frmula Balance at the end f the mnth fr which refund is applied Balance at the end f the date f filing the refund claim, b. The system which was amended n 13 th April 2018 nly. Till that time, exprters have faced the difficulties in filing the nline refund claim. Till that time, refund claim is filed nline, even physical cpies are nt accepted by the jurisdictinal fficers and exprters have t run frm pillar t pst t slve the queries which remain un-slved. c. Statement A which is required t be filed fr applying the refund under Rule 89 cannt be upladed in the system and therefre nline applicatin cannt be made and until nline applicatin is made, jurisdictinal fficers are nt accepting the physical cpy. Thereby exprters are deprived f the refund f duty paid by them n inward supplies used fr exprts. d. Deemed Exprt Refund: In accrdance with the prvisins f the Rule 89 f CGST Rules 2017 and ntificatin 49/2017 Central Tax, refund is granted n duty paid when gds are supplied, which are termed as Deemed Exprts and such refund can be applied either by recipient r supplier. The system has been designed that nly recipient can apply fr the refund and nt the supplier. Jurisdictinal fficials nt accepting the refund claims frm supplier and therefre huge refund is blcked n accunt f such system design. Restrictin f Refund fr supplies received frm EOU, EPCG / Advance Authrizatin Hlder: CBIC issued mst awaited clarificatin vide Bard Circular 45/19/2018 GST dtd n refund under Rule 89. In any case, exprters will nt bear the incidence f IGST n the inputs and therefre mre clarity has been given in the said circular. Hwever, Rule 89 was amended vide Ntificatin N. 3/2018 dtd , which was

4 made effective frm 23 rd Octber 2018 and clarificatin has been issued nly in the mnth f May Till the time, there was a lt f cnfusin and exprters were suffered Sectin 54 f CGST Act 2017 and Sectin 16 f IGST Act 2017 prvides fr refund f duty paid n exprts r inward supplies used fr exprts which are cleared under LUT withut payment f IGST. Whereas ntificatin n. 3/2018 Central Tax dtd has been issued restricting the refund claim t thse persns wh has received the supplies frm EOU, EPCG / Advance Authrizatin Hlder r supplies made at 0.1% f tax n the cnditin that these gds will be exprted. Albeit, it has been stated that cnditins and prcedures can be given in the rules fr safeguarding the revenue, but rule cannt make change the eligibility cnditin. Further, the ntificatin has been drafted in the manner s that lt f litigatins are expected due t understanding and different interpretatin withut specifying the perid. Separate article is given explaining the impact f such amendments. Ntificatin 3/2018 Central tax issued n and made applicable retrspectively frm withut understanding the fact that incidence f tax has been already paid and cllected by Gvt and nw they cannt deprive any exprters fr getting that amunt back. Frmula f calculating the refund f inverted duty structure: Sectin 54 f CGST Act 2017 prvides the refund f duty under inverted duty structure i.e. when yur input tax is higher than that f utput tax. It prvides the wrding n input tax paid n the supplies, which includes gds & services. Hwever, ntificatin number 21/2018 Central Tax dtd , restricts refund f ITC n gds nly and nt cnsidering ITC n services. It is imprtant t nte that when any utward supplies are supplied at higher rate, it is supplied frm the inward supplies which includes gds & services and therefre restrictin has been placed by the rule which is nt permitted under the law and needs t be challenged befre the Hn. High Curt. Further, the ntificatin has been issued restricting the ITC nly n gds n , whereas system d nt allw refund claim taking the ITC fr gds and services prir t In the present case, rules verride the sectin and system verride the rules. This can happen nly in India. Payment f IGST t the Advance Authrizatin hlder fr replenishment f gds Ntificatin N. 79 Cus dtd has been issued t exempt IGST t EPCG Hlder and Advance Authrsatin Hlder. Hwever, it restricts the exemptin nly in the case imprts are made prir t exprts. Whereas, freign trade plicy very clearly prvides the exemptin f duties t imprts against Advance Authrisatin hlders even if it is fr replenishment. Prir t GST Era, there was ptin t pay additinal duties under the Custm Tariff Act t the Advance Authrisatin Hlders in the case f pre-exprt / pst-exprts. Hwever, in GST Era such ptin is nt been given t the exprters and when gds are imprted befre exprtatin then ne has t take the exemptin and if it is fr replenishment i.e. pst exprtatin then n exemptin f IGST is given. This is nt in terms f IGST.

5 New Bard Circular N. 12/2018 dtd : The bard circular admits that despite issuing number f circulars still exprters are nt getting refund and they have issued ne mre circular n accunt f n interface f GSTN with ICEGATE. And therefre, exprter has been asked t btain Chartered Accuntants Certificate fr the perid f exprt made frm 1at July 2017 t 31 st March 2018 and required t be submitted n r befre 31 st Oct 2018 t prvide the fllwing details: a) Even if there is n shrt payment, the IGST paid n exprts reflected in GSTR-3B is equal r greater than the IGST paid n exprts reflected in GSTR-1 then Chartered Accuntant Certificate is required t be furnished (n frmat prescribed) n r befre t Custm ffice f prt f exprtatin cvering all the reprts frm all the prts r submit prt wise at the ptin f exprts and cpy f such certificate will have t be given t Jurisdictinal GST Officer. It has been very clearly stated that nn-submissin f CA Certificate shall affect the future IGST Refund. b) When there is a shrt payment n IGST paid n exprts reflected in GSTR-3B is less than IGST paid n exprts reflected in GSTR-1 and such shrt payment will have t be paid thrugh challan and details f such payment if mre than Rs. 10 lacs will have t be certified by Chartered Accuntant. Such certificate will have t be furnished n r befre t Custm ffice f prt f exprtatin cvering all the reprts frm all the prts r submit prt wise at the ptin f exprts and cpy f such certificate will have t be given t Jurisdictinal GST Officer. It has been very clearly stated that nn-submissin f CA Certificate shall affect the future IGST Refund. It is unfrtunate, even if exprters have balance in electrnic credit ledger such amunt cannt be debited. Needless t say, thugh interest amunt is nt mentined, it will have t be paid as delayed Further, in any case exprters will have t face the audit f the department in the name f Pst Refund Audit. It seems that making exprts is crime, since they have t face lt f hurdle fr claiming the refund either under Rule 96 r Rule 89 f CGST Rules Way Frward-Practive Thinking: Hn. Prime Minister has annunced India as Manufacturing & Service Hub and prmting Make-in-India Brand but the actins f the gvt. While we have t accept gvt has issued varius bard circulars dtd. 15 th Nv 2017, 21 st Dec 2017, 15 th March 2018 fr laying dwn the prcedure f manual filing and prcessing f different types f refunds but due t abve issues, refunds are still lcked up which is mre than Rs 20,000 Cr. Gvt has issued a circular n 30 th May 2018 fr clarifying the refund related issues w.r.t. fllwings: 1. Refund f balance in electrnic cash ledger filed by ISD registered persn r cmpsitin tax payer and refund f electrnic cash ledger / credit ledger by nn-resident taxable persn 2. Refund f IGST paid made n exprt f services and supplied t SEZ Develper and Unit fr the perid till

6 3. Refund f un-utilized ITC f cmpensatin cess availed in cases where final prduct is nt subject t levy f cmpensatin cess n accunt f zer rated supply. It is further clarified that LUT shuld nt be insisted fr zer rated supply f exempted n nn-gst gds i.e. nntaxable gds. Still fllwing actins are required t be taken withut any further delay t save exprters and t achieve the dream f Hn. Prime Minister f Make-in-India : Ntificatin 3/2018 Central Tax dtd shuld be rescinded and new ntificatin needs t be issued with simple drafting allwing exprters t get the refund as envisaged in Sectin 54 f CGST Act In ther wrds, restrictins put in the ntificatin needs t be withdrawn with retrspective effect frm System needs t be mdified and remain valid fr different perid as per the amendment made time t time in the rules, since system cannt verride the prvisins f the rules r the sectins. While, drafting the rule either fr making r amendment, it has t be ensured that prvisins f the rules cannt verride the sectin. Till the time system is mdified as envisaged, manual applicatin t be accepted and t be prcessed immediately and grant the refund. Gvt shuld cme ut with the system t grant prvisinal refund n the based n the returns filed by GSTR-3B and GSTR-1 shwing IGST paid n exprts and such prvisinal refund can be t the extent f 90% in case f refund under Rule 96 and Rule 89. CBIC/ GST Cuncil shuld cnsider all the difficulties as mentined abve and prvide a simple slutin, s that there will be sme energy fr revival f exprts.