Under-billing to claim higher GST refund divides industry
Many exporters in Punjab are cheating the government by raising fraudulent invoices, which involves bogus billing, hawala and under-invoicing for goods from China. Levelling these allegations, the Federation of Punjab and Small Industries Association (FOPSIA) maintains that such practices bring disgrace to the entire industry. At the same time, other industrialists feel that because of a few black sheep in the industry, not all exporters should be held accountable and if there are specific cases, these should be brought on record.
Badish Jindal, president, FOPSIA, has alleged that many exporters in Punjab were duping the government by giving wrong information about their exports. “These exporters, in most cases, overstate the value of the products. This fraud is the biggest in auto parts as it attracts 28 per cent GST. Many auto part products are exported by such exporters at much higher prices than the actual cost to claim higher GST refunds (under HSN code 8708 at higher prices),” said Jindal.
Similarly, he added that exporters who export fasteners sell their products under 8708 HSN code instead of 7318 HSN code and get 28 per cent GST back from the government instead of 18 per cent. This is the situation for many exporters of cycle parts. Many bicycle parts exporters are selling their products under 8708 code instead of 8714 code and are getting 28 per cent GST back instead of 12 per cent. In cycle parts, many products such as chain, crank, tyres, rims, brakes and balls are shown as auto parts to get higher claims. These exporters have set up their own offices in many African and Asian countries. Most of these importing countries have very low or nil import duty. “These exporters then ship on higher rates and bring back the extra money to India by paying 2 per cent to the hawala operators,” alleged Jindal.
At the same time, SC Ralhan, former president of FIEO (Federation of Indian Export Organisations) said that this cannot be a “generalised statement”. There could be isolated cases like this but not all exporters from different industrial sectors are into this kind of unethical practice, he said and asked, ”How can this practice continue right under the nose of the Customs Department?”
Jindal also mentioned that in many cases, such payments are forwarded to China against imports to bring the material from China on under-invoicing. To manage the cost of higher value, these exporters buy the bogus bills by paying 5 per cent to 7 per cent GST and claim 28 per cent from the government. These exporters sell the material to the buyers on heavy discounts and earn huge profit from GST refunds and other export benefits.
President, United Cycle & Parts Manufacturing Association (UCPMA) Harsimarjit Singh Lucky, however, said that they were not facing any such issues in the bicycle industry and exporters were normal. “Rather, we are facing trouble in imports in this particular segment. The products coming from China are coming with under-invoicing, which cannot be matched with those manufactured here. Because of this under-billing practice in imports, the country and the department in particular are facing huge revenue losses. And this is being done by a large number of industrialists in connivance with a few officials of the Customs Department,” said Lucky.
