DRI detects double benefit by traders from IGST, compensation cess exemption

New Delhi: The Directorate of Revenue Intelligence has asked various importers to pay up customs duty on goods imported under advance authorisation or export oriented units (EOU) scheme since 2017, after it found that many have taken double benefit of exemption of integrated goods and service tax (IGST) and refunds on goods exported.

In notices issued to several importers, the DRI field units have said that the importers were ineligible to claim refunds on exported goods and asked them to pay up the customs duties due.

“It is requested that you may consider making voluntary payment of such customs duty in the form of integrated tax or compensation cess, along with applicable interest to avoid punitive action,” said a notice issued by DRI’s Kolkata branch to a Delhi-based company, which was seen by ET.


A response has been sought within 15 days. Officers have also sought details of advance authorisations in correspondence to imports and exports.

In the notices issued, officers have also sought separate details of imports under EOU scheme on which IGST exemption has been claimed and compensation cess availed, and details of exports made on payment of IGST and IGST paid after October 2017.

A senior official said that the exercise has been undertaken on a national scale along with the Directorate General of GST Intelligence (DGGI) that is extensively looking into the issue of fake invoicing used to claim input tax credit (ITC) fraudulently.

“There have been preliminary inquiries and wherever evidence of undue benefit or claiming of refunds through illegal means has been found, notices have been issued,” the official added.

The official added that the agency was looking keenly at exporters covered under the erstwhile duty duty drawback scheme that were using over-invoicing as a means of fake invoicing to claim undue ITC.

Industry insiders said that the notices are likely to have gone out to large companies as well as the practice of taking the double benefit was rampant.

"Taxpayers have claimed innocence on account of frequent amendments made in the refund laws over the last three years but tax recovery from importers would be done," said Rajat Mohan, senior partner at AMRG Associates. He added that the amounts could contribute hugely to the exchequer within the next couple of months, easing the revenue deficit.

The government has intensified its drive against GST evasion and fake invoicing for availing ITC through fraudulent means. Fake invoices are not only used to evade payment of GST and income tax, but unscrupulous owners can also use them to inflate expenses to siphon money from companies and transfer the money abroad through illegal channels and by inflating imports and exports.