Withholding Of IGST Refund!

Withholding the payment of refund

As per Section 54(10) of the GST Act, Where any refund is due to a registered person who has defaulted in furnishing any return or who is required to pay any tax, interest, or penalty, which has not been stayed by any court, Tribunal or Appellate Authority by the last for filing an appeal under this act, the proper officer may-

1. Withhold payment of refund due until the said person has furnished the return or paid the tax, interest, or penalty, as the case may be;
2. Deduct from the refund due, any tax, interest, penalty, fee, or any other amount which the taxable person is liable to pay but which remains unpaid under this Act or under the existing law.

Rule 96(4)

Rule 96 of the CGST Rules governs the refund of IGST paid on exported goods or services. Rule 96(4) says that the claim for refund shall be withheld where,

1. On request of GST Jurisdiction:- A request has been received from the jurisdictional Commissioner of central tax, state tax, or union territory tax to withhold the payment of refund due to the person claiming a refund in accordance with the provisions of sub-section (10) or sub-section (11) of section 54.
2. On request of Custom Officer: Where the proper officer of Customs determines that the goods were exported in violation of the provisions of the Customs Act, 1962.

Recently after the 47th Council Meeting, the below-mentioned clause is also added to Rule 96(4) and inserted vide NOTIFICATION NO. 14/2022–Central Tax dated 05-07-2022 w.e.f. 01-07-2017.

On Request of Commissioner in the Board or any other Officer of Board:- On the basis of data analysis and risk parameters, is of the opinion that verification of credentials of the exporter, including the availment of ITC by the exporter, is considered essential before granting of refund, in order to safeguard the interest of revenue.

Afterward, in lieu of added clause, CBIC authorized the Principal Director General/Director General of Directorate General of Analytics and Risk Management (DGARM), CBIC, New Delhi to exercise the functions under clause (c) of sub-rule (4) of rule 96 of the CGST Rules, throughout the territory of India.

Now, on the basis of DGARM's Input, the power of "withholding the refund can be exercised" irrespective of the jurisdiction all over India.

Please be noted that apart from the DGARM, Directorate General of GST Intelligence(DGGI) also have all India Jurisdiction for Adjudication of any GST Case.

What does DGARM do?

A body set up w.e.f. 01-07-2018, to provide intelligence inputs and carry out big data analytics to assist the tax officers with better policy formulation and nabbing evaders.

The DGARM functions under the CBIC, mainly to use internal and external sources for detailed data mining to generate actionable inputs.?

The DGARM is an attached office of the CBIC which reports to the Chairman, CBIC through Member (Investigation).

This Directorate General functions for Customs, Central Excise, and Goods and Services Tax.

Way Forward

Lately, in this April Month, the CBIC added/redesigned a few rules and functions mechanism of DGARM. Seems like, they are trying to give DGARM much more importance, since we have observed that, on the basis of the report of DGARM, many refunds were withheld. Not only refund, but DGARM also passes on the risk parameters to GST Audit for listing down the assessee shortlisted for GST Audit and to Jurisdictional Officers for taking necessary actions as per Section 83 of the GST Act i.e. Provisional Attachment of Bank Account.

Now, be it DGGI or DGARM, they function and perform certain procedures, just to curb and put a check on the malpractices in the trade. But, These authorities are empowered with all India jurisdiction, which comes up with much more responsibilities as we have seen officers abusing the use of power also.

Thus, it is advised to all the consultants and Assessees to follow the guidelines, law, and notifications as and when issued, and a proper complaint mechanism in the business should be established.

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