Rampant Input Tax Credit frauds bring export firms under scanner in Telangana

In a first in Telangana, a Siddipet-based export firm was detected as a defaulter for indulging in fraud by misusing export incentives.
For representational purposes
For representational purposes

HYDERABAD: AFTER chasing several local traders found evading GST, the sleuths of GST and Customs are now hot on the trail of enterprises that are allegedly indulging in fraud by misusing export incentives. A few unscrupulous exporters are learnt to be availing input tax credit (ITC) fraudulently and utilising the same for the payment of Integrated Goods and Service Tax (IGST). They then fully reclaim this amount from the government, as refund for zero-rated exports. 

In a first in Telangana, a Siddipet-based export firm has been detected as a defaulter in this regard. “The owner of the firm has admitted to having committed the fraud as advised by some chartered accountants. He was jacking up revenues through fake invoices to avail bank loans. We have seized around 55 shipping bills that need to be verified. The IGST refund has been blocked and a show cause notice is being issued,” said an official. 

On June 17, the Central Board of Indirect taxes and Customs (CBIC) had issued a circular in this regard to its field officers across the country.  According to the circular, “Exporters have availed ITC on the basis of ineligible documents or fraudulently and utilized that credit for payment of IGST on goods exported out of India. It has also been observed in several cases that there is huge variation between the FOB value declared in the Shipping Bill and the Taxable value declared in GST Return apparently to effect higher IGST pay out leading to encashment of credit.” In addition, the CBIC had also flagged over 5,000 businesses as ‘risky exporters’. It is learnt that ever since the issuance of the circular, the customs officials have been on their toes verifying exports based on risk factors.

Since the IGST refunds are auto-generated, crores of rupees loss to the ex-chequer is suspected. Hence, a manual verification process was also introduced recently.

Subsequently, the four GST commissionerates of Telangana are preparing to go after the erring businesses. “It is for the first time that such cases have been detected in Hyderabad. But the defaulting export firms need not be based in Hyderabad to use the Air Cargo at Shamshabad airport, or Inland Container Depots at Thimmapur here,” said the official. Another official pointed out that such frauds were carried out by ‘fly-by-night carriers’ with no history in exports. “Customs will stop the payment of the refund if such fraud is detected. Our GST formations will also be inquiring further,” he said. 

“It is nothing but the misuse of export incentives. We used to frequently detect the cases of fake invoices for ITC. But over the last few months, it appears the menace has got into exports too,” said an official.

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