Many exporters have come under the taxman’s lens for claiming tax credit for the same export twice under the inverted duty structure. Those who have received notices from the indirect tax department said they had merely claimed what was theirs — although in two tranches.
According to the notices, the anomaly came to light during an audit conducted by the tax authorities. The tax department claimed that these exporters had claimed double benefits.
Inverted duty structure in the indirect tax framework refers to a situation where GST paid on the raw material is more than the goods exported. This led to a situation where the exporters would go and claim the refunds.
In many cases, say industry trackers, the refunds were claimed in two tranches.
“In several situations, the exporters have more accumulated credit than the IGST paid under the rebate option, thereby unable to set off the credits. Many exporters have been issued notices under the inverted duty structure, especially those who were paying partial duty through credit and seeking refunds of the rest of the taxes paid,” said Abhishek A Rastogi, partner at Khaitan & Co.
The issue was raised at a time when the revenue department is staring at a ₹30,000-crore shortfall in GST collection.
This is not the first time the exporters have come under the indirect tax department’s scrutiny.
The Directorate of Revenue Intelligence (DRI), the primary anti-smuggling intelligence agency, had issued notices to the exporters for wrongfully availing exemptions in cases where exports preceded imports. The notices issued by the DRI asked exporters to pay IGST in cases where the raw material is imported only after goods are exported partially or fully.
Under the advance authorisation scheme in the erstwhile tax regime, the exporters could get an authorisation to import raw materials used for manufacturing exported goods without payment of taxes on imports based on past exports.
Industry trackers anticipate a spate of litigations ahead. “There is no double benefit claimed under the CGST Act, we may file a writ petition to challenge relevant provisions so that the Indian exporters get the full benefit of input taxes,” Rastogi said.