PremiumThe new rules empower authorities to mandate additional disclosure and certification requirements to be followed by importers of such goods where authorities suspect systematic under-valuation of imports, which robs the government of revenue.
New Delhi: Importers of items that have a history of customs duty evasion through under-valuation will face higher scrutiny and greater disclosure norms, under a new official framework issued on Wednesday.
The new rules empower authorities to mandate additional disclosure and certification requirements to be followed by importers of such goods where authorities suspect systematic under-valuation of imports, which robs the government of revenue.
Wednesday’s order from the Central Board of Indirect Taxes and Customs (CBIC) said two committees will be set up—a screening committee with top officials handling revenue intelligence, valuation, analytics and risk management; and an evaluation panel of officials to investigate the cases after a preliminary examination by the screening committee.
Based on their findings, CBIC will order greater disclosure and compliance requirements needed for importers of that category of goods.
This could include technical details to be disclosed in the import documents and other possible obligations of the importer to show that the consignment is not under-valued, and additional checks to be followed by officials.
The order will be valid for one to two years.
Officials may have to keep in mind a ‘precautionary unit value,’ which the tax authority considers as the accurate benchmark price of the item. Authorities will hold extensive research on prices of identified items in global markets to check under-invoicing.
The move follows reports about systematic under-invoicing of imports from China.
“The new rules enable the government to identify a class of imports where under-invoicing is rampant and after evaluation, prescribe additional declarations needed from the importer to show that the consignments are not under-valued," said Abhishek Jain, Partner, Indirect Tax at KPMG in India.
The issue of undervaluation in imports is a menace for the exchequer and the domestic industry that needs to be resolved for long-term growth of the Indian economy, said Rajat Mohan, partner at AMRG Associates, an accounting firm.
The latest set of rules, called the Customs (Assistance in Value Declaration of Identified Imported Goods) Rules, 2023, which is effective from 11 February is based on an amendment to the Customs Act introduced in Finance Act of 2022.
“Customs Automated System will mandate importers of specified goods to fulfil specified additional obligations, that will arrest short-payment of customs duty. The rules lay down a stable process to identify risky goods, that have passed through a detailed examination by various senior officers at CBIC," said Mohan. These regulations would empower tax officers to ensure the truthfulness and accuracy of the declared import value of identified goods, said Mohan.
According to trade experts, the gap between trade data from India and China was most likely due to under-invoicing of shipments by Indian importers to avoid paying import taxes, Mint reported on 3 November.
Mint also reported that while China claimed that trade with India touched $103 billion in the first nine months of 2022, India’s data showed that bilateral trade stood at just $91 billion.