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NEW DELHI : India is set to firmly oppose any further extension of a moratorium on the imposition of customs duties on electronic transmission at WTO’s 12th ministerial conference (MC12) starting June 12 as it favours developed nations only, a government official said on Tuesday.
WTO members have agreed not to impose customs duty on electronic transmission since 1998 and the moratorium has been periodically extended at the ministerial conferences but several countries are seeking to make the moratorium permanent.
Officials argued that since digital trade at present is dominated by big tech and developed countries, the moratorium squarely favours the developed nations. Meanwhile as per some estimated India loses about $500 million annually by foregoing duty on e-transmission.
“Though it is not clear what is an electronic transmission. The dominant understanding has been that it is a digital good. Digital goods are now growing in trade and are being exported mostly by developed countries. So we should have the policy space to levy customs duty if we want," a commerce ministry official said.
India and South Africa (SA) have been making several joint submissions highlighting the adverse impact of the moratorium on developing nations and suggesting that a reconsideration of the moratorium is important for developing nations so as to preserve policy space for their digital advancements, another official added.
“One of the reasons why the moratorium exists is that it is not possible for customs to collect tariffs as in the case of goods. Every year India tries to use the withdrawal of the e-commerce moratorium as a bargaining tool in the WTO. We do need data on e-commerce trade in India to have a clear position. At present, there is no government data on the same," Arpita Mukherjee of ICRIER told Mint.
In one of the joint statements by India and SA, it was argued that the percentage of customs revenue lost for developing nations is 4.35% while that of the developed countries is a mere 0.24%. Moreover, India has argued that the pace of growth of 3D printing would significantly increase the potential tariff revenue loss.
“As per UNCTAD, 3D printing is currently at a nascent stage in developing countries, its market has grown annually by 22% between 2014-1018 and it is estimated that if investment in 3D printing is doubled, it could potentially replace 40% of the cross-border physical global trade by 2047," India and SA had said in a joint statement.
Pradeep S Mehta, CUTS International also concurred stating that while digital trade undoubtedly needs to be promoted, the revenue hit taken by developing countries like India by entirely exempting electronic transmissions from customs duties is significant.
Mehta added that in a dynamic area like this, with rapid technological developments, the periodic renewal of the moratorium on levying duties on e-transmissions should not be a mechanical exercise.
“A proper cost-benefit analysis, examining the benefits in terms of expanding digital trade, and the costs in terms of revenue foregone, especially for developing countries, must be conducted from time to time," he added.