The Revenue Department has asked the Director General of Foreign Trade (DGFT) to make the system of accrediting exporters with ‘star’ tag more robust as such exporters enjoy many facilities, including reduced customs inspections. The department based its 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 Rs 1,650. In another case, tax payments in cash were Rs 51,201 while the exporter obtained refund of Rs 9.59 crore. It is believed that such cases involve fake invoicing and fraudulent tax credits, which have been encashed through the facility of IGST refunds,” an official said.
The department further said there was a strong case for DGFT to continuously (or annually) seek a compliance and verification report from other regulators or obligate exporters to produce statutory records of compliance, including certifications from banks of “no NPAs”.
Star Export House exporters are certified 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.
“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 Rs 1 crore in FY18 and FY19, 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. —FE
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