The Central Board of Indirect Taxes & Customs chair Sanjay Kumar Agarwal talks about the effects of the customs rate rationalisation in the Union Budget. Edited excerpts
Q. The customs-rate changes and duty exemptions will lead to a revenue loss of Rs 2,600 crore. How will CBIC make up?
Ans. As part of the customs-duty rate rationalisation in the Budget, we have exempted surcharge on some items that were subject to both cess and surcharge. Also, wherever we have brought the items to lower tariff slabs, we have imposed an equivalent amount of agriculture infrastructure development cess to keep the duty incidence level the same, except for certain items, where it is slightly lower. This is resulting in a revenue loss of Rs 1,900 crore.
Additionally, in the Budget, there are certain items on which exemption has been provided to promote the Make in India initiative or exports. By this entire exercise, including the rate rationalisation, the loss of customs duty is to the tune of Rs 2,600 crore.
That is slightly more than 1% of the customs-duty realisation in the previous year, which was Rs 2.3 lakh crore. This loss has been factored in the Budget estimate of next year’s revenue realisation from customs duties, which is Rs 2.4 lakh crore.
Q. Is the customs-duty rate rationalisation a result of pressure from the Donald Trump administration?
Ans. This exercise was announced by the finance minister in last year’s July Budget. Seven tariff rates were eliminated in 2023 as well. And this year, seven more tariff rates have been eliminated. But yes, it will improve the optics about the customs duty structure in India.
Q. With multiple customs-duty and tariff rate revisions, do you see an increased risk of China dumping goods?
Ans. In case there is a surge in imports from China on any item, and there are reasons to doubt that these are as per market rates, then there are provisions under the Customs Act for anti-dumping duty or safeguard duty. Those situations can be handled by investigation, if required, by the Directorate General of Trade Remedies.
“In case there is a surge in imports from China on any item, there are provisions under the customs act for anti- dumping duty”
Q. You previously said that with these changes, India will be at par with Asean economies. How much import growth do you expect?
Ans. I have not said ‘at par’ but yes, we have moved towards [parity]. Say, earlier the distance was 3%, now it is 2%. Since we have kept the effective incidence duty at the same level, except for a few items, I don’t think the changes will have much of an impact on imports.
Q. How do India’s efforts to establish customs agreements with countries like the US, Japan and South Africa stand?
Ans. All the free-trade agreements are regularly reviewed, so after a certain amount of time those will come for review too. I am not aware [of their exact status] because that is the domain of the Union Ministry of Commerce.
With Japan we have a certain pact, [there are] certain negotiations going on with the European Union too.
Q. Are there plans to introduce a customs amnesty scheme in the near future?
Ans. I have found that consulting firms sometimes raise this issue, but I have not heard from trade and industry that they want a customs amnesty scheme. Certain amnesty schemes were announced with regard to internal taxes, maybe income or service taxes and central excise duties.
The last one [customs amnesty scheme] was the Kar Vivad Samadhan Scheme in 1998. After that there has been no amnesty on the customs side. Also, in customs notices, apart from the duty angle, there are generally other angles. There are other sections under other acts that are also invoked which are not in the domain of the customs department. So, those issues go out of the purview of any amnesty scheme.
Source from: https://www.outlookbusiness.com/magazine/customs-duty-revisions-will-improve-optics-says-sanjay-agarwal
