Refunds under GST have been marred with technical issues with the GST Network and its interface with the Customs department, which has impacted exporters more.
To give liquidity support to businesses and individuals impacted by the Covid-19 pandemic, the government on Wednesday said that it would issue Rs 18,000 crore of pending refunds related to both the direct and indirect taxes to taxpayers of all categories, immediately. The direct-tax-related refunds would be limited to a maximum of Rs 5 lakh/taxpayer and would cover about 14 lakh taxpayers. Pending refunds for Goods and Services Tax and the Customs duty would benefit about 1 lakh entities, including MSMEs, which are hit the most by the pandemic.
Despite the decline in tax revenue growth in recent months, the government has been liberal in release of direct tax refunds. The income-tax department had issued nearly 23% more refunds till November 2019, compared with the corresponding period a year ago. This amounted to Rs 1.46 lakh crore for 2.1 crore cases, compared with 1.75 crore cases in the year ago period.
However, GST-related refunds, despite the government’s repeated commitments to speed them up, have often been hit by technical glitches. The delays in GST refunds were more visible with state governments.
Refunds under GST have been marred with technical issues with the GST Network and its interface with the Customs department, which has impacted exporters more. For instance, the official data till September 1, 2019 shows that just over 75% or Rs 82,000 crore refund claims had been sanctioned. Further, while the Centre had given out Rs 47,000 crore or nearly 90% of the refunds for which applications had been filed, the number was just over 60% or Rs 35,000 crore for states.
MS Mani, partner, Deloitte India, said: “In a situation where businesses are making plans of dealing with cash crunch situations on resumption of operations, enabling GST refunds on a war footing would assist businesses and energise them.”
Ritesh Kanodia, partner, Dhruva Advisors, said: “The directions for grant of immediate GST and Customs refund is a very positive move considering the liquidity crises arising out of the Covid-19 situation. We have seen that such refunds in the past have been consistently delayed either because of a technical or a procedural nuance which has led to difficulties specifically for MSME sector and has also led to litigation across India on multiple issues, with no standardisation on the orders being issued on the points of dispute. It appears that only refunds processed finally until now will be released. It is however expected at this stage that the authorities provisionally issue all refund claims filed and technical or procedural issues are taken up as a post facto exercise.”