New Delhi, Nov 1 (KNN) Large number of exporters from the micro, small and medium enterprise (MSME) sector have expressed serious concerns over the Central Board of Indirect Taxes & Custom’s (CBIC’s) circular stating that it would not be justified allowing exporters to avail IGST refund after initially claiming the benefit of higher drawback or even where higher and lower rates of duty drawback were identical.

Talking to KNN India, the exporters said that the issue has stuck their crores and crores of rupees obstructing credit flow in their businesses. As many as 100 MSME exporters have decided to file a petition in this regard with the High Court. They have estimated that not less than Rs 5000 crores are stuck due to this particular issue.

In a recent circular, CBIC said, “Numerous representations have been received from exporters /export associations, regarding cases where IGST refunds have not been granted because higher rate of drawback has been claimed or where higher rate and lower rate were identical. The issue has been examined extensively in this Ministry.”

It said, “All Industry Rates of Drawback had been notified and which were applicable for availing composite rates during period in question (i.e. 1.7.2017 to 30.9.2017), prescribed that 'The rates and caps of drawback specified in columns (4) and (5) of the said Schedule shall not be applicable to export of a commodity or product if such commodity or product is —(d) exported claiming refund of the integrated goods and services tax paid on such exports'.

Further it stated that “The rates and caps of drawback specified in columns (4) and (5) of the said Schedule shall be applicable to export of a commodity or product if the exporter satisfies the following conditions, namely :-(ii) If the goods are exported on payment of integrated goods and services tax, the exporter shall declare that no refund of integrated goods and services tax paid on export product shall be claimed; .......”

“By declaring drawback serial number suffixed with A or C and by making above stated declarations, the exporters consciously relinquished their IGST/ITC claims,” the circular said.

CBIC said, “It has been noted that exporters had availed the option to take drawback at higher rate in place of IGST refund out of their own -volition. Considering the fact that exporters have made aforesaid declaration while claiming the higher rate of drawback, it has been decided that it would not be justified allowing exporters to avail IGST refund after initially claiming the benefit of higher drawback. There is no justification for re-opening the issue at this stage.”

Responding to this, Pankaj Bansal, Director, TMA International, a Delhi based exporter of engineering products, said, “There were two above mentioned sections for IGST/ITC claims. At the time of transition into this very new GST regime, we had asked the custom officers about this but they were not clear that which column we should choose. We claimed A.”

Much to our surprise, we never got the refund, however, we got a reply from the customs that we have wrongly chosen ‘A’ hence IGST refund has not been processed, Bansal added.

Earlier we were neither paying taxes on purchase nor on the export of goods and were also receiving duty drawback. However, now GST is being paid by us on the purchase as well as on exports and the government refuses to fulfil their promise of refunding the additional IGST paid by us leading to an acute shortage of working capital for the exporters, Bansal explained.

And then came the circular on October 9, he said adding that after this the issue was taken up by exporters apex body FIEO as well.

Bansal said, “FIEO had even written to the Finance Ministry but the reply is awaited.”

KNN India spoke to Sakshi Singhal, the lawyer who would file a petition for these exporters. She explained that basically there are two different duty drawback rates for cases where Cenvat facility has been availed and cases where Cenvat facility has not been availed.

Duty drawback is given to neutralize the taxes that have been paid on materials and services used in manufacture of product that will be exported, she said.

Even if they are availing higher rates it will be usually 2% or 4% (duty drawback rates allowed under customs) but what they have paid is 18% (IGST).

In some cases, the drawback rate (both higher & lower) is the same. While one rate is given in Column-A the other is given in Column-B. If exporter has wrongly mentioned A, the GST refund has been denied while the exporter has not claimed higher drawback since both rates of drawback are the same, Singhal said.

She said exporters would have received the same drawback amount weather they would have chosen A or B.

She claimed that it was due to technical glitches as everything during the transitional phase was new to the exporters that they mentioned ‘A’ instead of ‘B’ and merely because of this technical glitch the government can’t deny their refunds.

MS Syed from Mumbai based Sharia exports said, “There was a meeting between exporters and GST officials in Mumbai before the GST was implemented in which around 2000 exporters were present. They claimed that IGST refund would be done within seven days from the date of filing shipping bills without query.”

Syed said this whole thing has happened because of technical glitch and hence the government should not deny the exporters refunds.

The exporters have decided to make a representation before the Finance Ministry before filing a petition. Their lawyer Singhal said the representation is ready and they would soon send it to the Finance Ministry by Monday.

If still no action is taken, they would file a petition next month, said the exporters. (KNN Bureau)