Delayed refunds under the Goods and Services Tax (GST) continue to trouble the taxpayers as well as the government, even as exporters again raise concern over the issue. The exporters' association - the Federation of Indian Export Organisation (FIEO) - recently made an uproar about pending refunds worth Rs 20,000 crore.
After the uproar, the government has now announced Special Refund Fortnight from today. The government has also clarified that unlike what is claimed by the FIEO, the refund due is Rs 14,000 crore (Rs 7,000 Crore on the IGST side and Rs 7,000 Crore on account of input tax credit). It also said that so far it has sanctioned more than Rs 30,000 crore as GST refund. This includes an amount of Rs 16,000 crore of IGST and Rs 14,000 crore of input tax credit.
Despite the government's claim that they have been doing everything required to streamline the process, one thing is sure that the refund mechanism has not been functioning smoothly even though the GST is completing a year. What are the reasons for faltering refund system under GST? Who are at fault - the taxpayers or the authorities?
The Federation of Indian Export Organisation has listed some of the reasons for the delay in refund in a press statement. The federation says that the process of ITC refund is partly electronic and partly manual, which is cumbersome and adds to the transaction cost. It further says that the tax authorities are reluctant to accept the applications and ask for irrelevant documents. Some states have even cited lack of funds for delay in the refunds.
Tax experts cite some more reasons for the delay. The law requires that 90 per cent of the refunds claimed should be provisionally granted within seven days of submission of application, and 100 per cent should be granted in two months. Experts say that the system as laid down in the law is not at all functional.
"Authorities are not following the system of refunds as prescribed in the law. They are saying that the refund would be made once and for all," says Saloni Roy, senior director, Deloitte India.
Rajat Mohan, Partner, AMRG & Associates, says: "The law also requires the authorities to verify the basic details of the refund application and issue the applicant an acknowledgment before refund is issued within 7 days. The authorities are not issuing acknowledgment."
Saloni Roy of Deloitte India, says, the procedure of providing refund is being repeated at both the central and state authorities level, often leading to delays.
In some cases, especially exports of services, different interpretation of the formula for calculation of service exporters is also leading to delay. "The officers are interpreting the formula in such as way that the ITC refunds calculated by them are lower than claimed by exporters," says Saloni Roy of Deloitte.