GST network data has brought forth the problem of delayed returns
An investigation of the data collected by the GST network reflects multiple discrepancies in information. A large number of cases are said to be in situations where refunds are stuck due to flawed or incomplete information.
What is GSTR 1 / Table 6A?
The implementation of the Goods and Services Tax (GST) proved to be a risky decision and ended up having a significant impact on the entire country. This Act came into effect in July 2017 and was backed by the Goods and Services Tax Network (GSTN). The network aims to provide IT infrastructure and service and deals with all aspects of GST. This tax system continues to have constant tweaks and amendments made to it to make the process more transparent and efficient.
One such initiative is the GSTR 1 (GST Returns). It is mainly concerned with suppliers and deals with reports of their outward supplies during the specific reporting month. It acts as a starting point for passing input tax credits to the dealers. Currently, all registered taxable individuals under GST are expected to file this provision by the tenth of the month. Failure to do the same would result in a late fee being charged to the dealer. There are specific tables under Form GSTR 1 with one such being Table 6A. Table 6A was introduced to help exporters within the country claim GST refunds on any goods exported out more quickly and easily.
CBEC report on GSTN data
Following an analysis of the GSTN data, it was observed that refunds claimed by exporters are higher than the GST paid by them in a significant number of cases. Moreover, complete information regarding this was not forwarded to the Central Board of Excise and Customs (CBEC). Since October, the Board has sanctioned Rs. 4,000 crore worth of refunds to exporters. However, Rs. 10,000 crore worth of claims is still stuck due to mistakes and inconsistencies in the information provided by the exporters while filing GSTR 1 Table 6A or GSTR 3B. In response to the analysis, CBEC stated “The analysis of data indicates that only about 32 percent records of GSTR 1 / Table 6A have been transmitted from GSTN to Customs. In other words, a majority (about 70 percent) of refund claims are held up either due to insufficient information or lack of due diligence on the part of exporter while filing GST returns.” It also added, “These records are not processed/forwarded to Customs by GSTN. E-mails have been sent to exporters asking them to correct their records through amendment process of GSTR 1, i.e. through Table 9 of GSTR 1 of the following month.” More investigation on the subject post-October also showed that while the mass errors in the filing are decreasing, a large number of exporters have still been filing the form incorrectly and missing out on certain information such as shipping bill numbers, dates or port codes.
Analysis indicates that most of the late refunds are due to lack of diligence and knowledge of the procedure to do the same. This delay hurts their businesses and their ability to be able to stand independently in international markets. A more accessible and structured filing process would help reduce the confusion and cut down on a majority of faulty forms. A spokesperson for the Federation of Indian Export Organisation also suggested an approach where the government doesn’t wait for final filings of GSTR 1, GSTR 2 and GSTR 3 to calculate refunds. Instead, it follows a system where it would release refunds based on GSTR 3B returns.
With the GST system being riddled with multiple loopholes, the need for the hour is to address and fix them efficiently and on time. In an interview, Prime Minister Narendra Modi said, “The GST too is a new system (as compared to the new income tax law). I have been saying this since the day one that people will take some time to adjust to the new system. We will have to improve wherever there are loopholes.”
Rajat Mohan, AMRG & Associates Partner stated that by simplifying the GST compliance framework and designing government programmes in a manner that achieves a robust digital literacy, one could make some headway on the problem. He said, “IGST refund to exporters are issued in a fully automatised environment, and even the smallest mismatch in invoice number results in non-issuance of refunds. Now, the government has planned to provide an alternative mechanism whereby exporters can get such errors rectified with the help of a manned interface placed at Customs department. This could address the worries of the exporters if this manned intervention is operated timely.”
According to CBEC, some of the significant errors committed by the exporters are mismatching invoice numbers, taxable value and the IGST paid in the shipping bill, incorrect shipping bill numbers in GSTR 1 and not matching GST identification number declared in the shipping bill to the one used to file the GST returns. In addition to this, there are also cases of non-filing or incorrect filing of electronic Export General Manifest (EGM). CBEC announced that information would be made available to the claimants on a real-time basis concerning errors on the website for its registered users. It also said that details of the refund sanctioned would be sent through an SMS on registered mobile numbers.