Risky Exporter Alert: All you need to know!

When alert of risky exporter is invoked on the Import Export Code, all the refunds of IGST, Drawback and other benefits gets stopped and all the export consignment are subject to verification. This stoppage of refunds causes huge loss to the export businesses and which in-turn will impact the Indian Economy. Here we will discuss about the alert of risky exporter and the procedure being followed to revoke the alert and regularize the refunds.

Based on GST, Income Tax and foreign trade transactions data, the Central Board of Indirect Taxes and Customs (CBIC) identified many entities as risky exporters. However, a group of micro, small and medium enterprises exporters said in a letter to CBIC chairman Vivek Johri that the mechanism used to tag exporters as risky is "neither transparent nor time-bound".

The CBIC has released Instruction no 04/2022 dated 28-11-2022 on the new way of processing withheld IGST refund applications.

Previously, CBIC issued the SOPs dated 23rd January 2020 and 20th May 2020. These were issued to CGST & Customs formations and the Directorate General of Analytics and Risk Management to verify risky exporters and their suppliers.

Previously, the process of Alert of Risky Exporter was as follows

1. DGARM suspects risky exporters and respective suppliers based on risk parameters.
2. Then forward the list of risky exporters to the Risk Management Centre for Customs (RMCC) to create an alert in the system.
3. Then the Customs officers shall thoroughly examine risky exporters.
4. The CGST formations (including Anti-Evasion Team) verify risky exporters and their suppliers and forward the detailed verification report to DGARM.
5. On the basis of this verification report, DGARM decides whether to issue NOC.
6. Then, the DGARM will communicate these List of Exporters for which NOC has been issued to the Customs Department for the revocation of alert and release of withheld IGST refunds and Drawback. @CASachinMJain
7. Also, DGARM reviewed the possibility of removing the NOC-issued customers from the list of identified exporters.

However, the CGST Rule 96 has been amended retrospectively, w.e.f. 1st July 2017. The amendment is made to consider the exporter’s verification based on data analysis and risk parameters as a reason for withholding IGST refunds.

The department has made certain changes in the alert module on the ICES, and DG Systems issued Advisory No. 14, dated 29th September 2022. The advisory points out that DGARM officers can place an All-India Suspension, either on the IEC or the GSTIN of the exporter, to withhold the IGST refunds. Also, the officers have been given the option to revoke the said alert.

New amended process of Alert of Risky Exporter was as follows

• DGARM will use data analysis and risk parameters to identify risky exporters.
• DGARM would place an all-India alert on risky exporters on the Indian Customs EDI system along with the reason(s).
• Once an Alert is invoked on a risky exporter, the system will withhold the IGST refunds of the such exporter. @CASachinMJain
• Details of a such exporter, risk parameters used for identifying the risky exporter, reasons, and auto-generated refund claim in GST RFD-01 as per rule 96(5A) would be transmitted to GSTN through ICEGATE.
• Also, all the previous cases which could not be processed due to a negative report or pending verification would be transmitted to GSTN through ICEGATE.
• All such refund claims will be made available to the jurisdictional officer.
• If the DGARM already has the risky exporter’s verification report, it will share it with the jurisdictional officer.
• Once received such refund cases, the jurisdictional officer shall immediately process them.
• After that, the Officer shall pass a detailed speaking Order of the refund claim and upload the same with the refund sanction order.
• The officer must follow the timelines laid down while processing the refund.
• Also, the officer shall provide feedback on whether the DGARM can remove the alert on the risky exporter.

CBIC stated that they had initiated the transmission of withheld IGST refunds of risky exporters identified by DGARM to the jurisdictional officers on the portal. Also, it clarified that the above procedure would supersede the earlier SOPs dated 23rd January 2020 and 20th May 2020.

Our View

This alert and verification of risky exporter was introduced with the intention to catch-hold those few mischievous exports who were fraudulently claiming undue Refunds and benefits from Government. However, many genuine exporters are getting affected due to long-drawn verification process and excessive documentation, only after which refunds are released.

On ground level, many exporters has faced the issue that a Negative report was submitted by the division officer and then the exporter has to go through super lengthy verification process.

Business of exporters are severely impacted due to stoppage of refunds in this Alert of Risky Exporter.

There has to be transparent well defined SOP for verification with time-frame, so that the business of exporters are not adversely affected.

There has to be a formal communication with reasons by the Department about this alert, as no notice is issued to exporter about the alert being invoked.

DGARM should update its procedure so that alert is invoked only on the fraudulent exporters and not on genuine ones.