SynopsisThe tax department had come out with a guideline to process these within a deadline and recently the authorities had said that the duty drawback claims also must be processed within a timeframe. This timeframe was also reduced to three days from seven.
MUMBAI: Even as the government has come out with a timeframe to process and give tax refunds under the indirect tax framework, many exporters complain of continuing delays and some are exploring legal options as they face cash flow issues.
Many of them have reached out to the government, claiming tight cash positions on account of delays in getting refunds and duty drawbacks they are entitled to.
The tax department had come out with a guideline to process these within a deadline and recently the authorities had said that the duty drawback claims also must be processed within a timeframe. This timeframe was also reduced to three days from seven.
Duty drawbacks are essentially refunds that can also be set off against future liabilities.
“The endeavour of the government was always to provide the refunds in a timebound manner and hence statutory provisions were included to grant such refunds in a timebound manner both in the erstwhile indirect tax regime and the current indirect tax regime. As in some cases the refunds are pending for more than 10 years, the appropriate remedy is writing to the jurisdictional court,” said Abhishek A Rastogi, a partner at Khaitan & Co.
Many exporters are also looking to take the government to court as they received tax notices even as their refunds were still not processed due to some “discrepancies” in their tax returns, said people in the know.
Officials said the scrutiny was needed as they wanted to make sure that this did not lead to revenue leakage.
The tax department had also started rejecting GST refunds offered to exporters for subsidiaries of multinationals in the information technology sector and Indian production houses, said people in the know.
As per the tax framework, an exporter need not pass on the GST paid on raw material or input services to the client or a foreign entity. The GST paid to the supplier by the exporter can be claimed back from the tax department as refunds. These refunds are typically set off against future tax liabilities by the exporters.
The tax department has now taken a stand that these MNC subsidiaries and production houses aren’t exporters and cannot get the refunds. Industry observers said the government was addressing several issues related to exporters.
The government on Friday announced expansion of a scheme to all export goods, which could help improve exporters’ cash flows. The Remission of Duties and Taxes on Exported Products (RoDTEP) scheme, which essentially deals with refunds of exporters, is set to put exporters in a better position, said experts.
“While the RoDTEP scheme is implemented from 1 January 2021, the rate of incentive has not been announced yet. The industry would expect that the rates under RoDTEP are more than the rates under the earlier Merchandise Exports from India Scheme to ensure that all the non-creditable taxes are recouped and exports from India are competitive in the global market,” said Abhishek Jain, a tax partner at EY India.
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