Dated 22th June, 2019

 Introduction of Checks by Government to counter bogus IGST Refund claims

Introduction of Checks by Government to counter bogus IGST Refund claims

Refund of IGST has been totally, a system driven procedure and exporters are availing their IGST refunds once EGM and valid returns in Form GSTR-1 and GSTR-3B are filed. The shipping bill itself is the refund application. However, it has been observed by various government authorities that some of the exporters have taken undue advantage of such an automated system and had been availing IGST refunds fraudulently. These exporters are availing ITC on the basis of ineligible documents or in any other fraudulent manner and are utilizing such ITC for payment of IGST on exports. Furthermore, in some cases it has also been observed that there is a significance difference between the FOB value as declared in the shipping bill and the taxable value in GST returns, with an intention to use the accumulated ITC in payment of IGST and thereupon get refund of credit on paying higher IGST.

In order to curtail such malpractices and to save the interests of the revenue the government has vide Circular No. 16/2019-cus dated 17.06.19 imposed various checks and such circular would also modify the procedure as stated in customs instruction issued earlier1 in cases wherein refunds were withheld. The checks imposed by the circular are outlined herein below:

  • Director General Systems (DG systems) to identify risky exporters:
  • The Director General Systems shall identify and forward the list of risky exporters at national level to both Risk Management Centre for Customs (RMCC) and to respective Chief Commissioner of Central Tax. Additionally, DG Systems shall provide past refunds granted to such exporters along with their bank details in which the earlier refunds were disbursed

  • RMCC would Insert Alert in the System to monitor Risky Exporters:
  • RMCC shall generate alerts for 100% mandatory examination of export consignments of risky exporters, and place alerts to suspend IGST refunds.

  • Custom Officers To Examine Goods To Be Exported By Risky Exporters:
  • Customs officers shall examine the consignment as per RMCC alert and clear the same under normal customs procedures if the examination matches with the declaration in shipping bills.

  • Suspension of IGST Refunds:
  • In spite of goods cleared for exports, shipping bills shall be suspended for IGST refunds by the Deputy/Assistant Commissioner of Customs until the verification report has been received from the GST authorities.

  • Verification By GST Authorities:
  • The Chief Commissioner of Central Tax shall get the verification of the IGST refund claims as per standard operating procedure to be issued by the GST policy wing. The GST formation shall furnish report to Chief Commissioner of Central Tax within 30 days specifying the amount of IGST paid and claimed/sanctioned as refund was in accordance with law or not.

  • Report To RMCC:
  • After receiving final report from GST formations, the chief commissioner of central tax shall compile and forward the same to RMCC and concerned customs port within 5 working days.

  • Action To Be Taken By Custom Authorities On Receipt Of Verification Report From GST Authorities:
    • Cases Where No Malpractices Reported On Verification:
    • After receiving a report from the Chief Commissioner of Central Tax that credit has been legitimately obtained, the custom officer shall process the IGST refunds to the extent verified by the GST authorities. A detailed advisory in this regard shall be issued by DG Systems for smooth functioning of customs officers handling refunds.

    • Cases Where Malpractices Reported On Verification:

    Where GST authorities detect bogus IGST claims, the custom officer will not process the refund claim.

Simple Checks to be observed by Exporters so that IGST Refunds are not withheld:

At the outset a check should be imposed by exporters that they take credit of only eligible ITC. Moreover, a parity should be maintained as to the declaration of correct value of export consignment in the GST returns as well as in the shipping bill.


The aforesaid circular is nowhere an intervention on the exporting community, it is just a check to ensure that no inappropriate/unscrupulous refunds of IGST is granted which would at large hamper the interests of the revenue. Moreover, even the risky exporters on being satisfying the checks as stated in the circular would be availing the refunds in a period of 30 days unlike the normal period of 14 days.

1Customs Instruction No. 15/2017-Cus dated 09.10.2017.

Introduction of Checks by Government to counter bogus IGST Refund claims

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Introduction of Checks by Government to counter bogus IGST Refund claims

Introduction of Checks by Government to counter bogus IGST Refund claims
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BT Associates, India

Twenty years of experience in tax practice. Specialist in structuring & planning and tax optimization under indirect tax. Lead eastern India indirect tax practice of Ernst & Young in past.