Government changed the customs rules to prevent the misuse of free trade agreements (FTAs). Explain.

By Srirangam Sriram, Sriram's IAS, New Delhi.

The concessional customs duties, including zero duty, under free-trade agreements (FTAs) would be available to importers only if they can prove that products have undergone value addition of at least 35% in the countries of origin. It is called the Rules of Origin. It encourages value addition in the countries that are members of the FTAs. It is as the other macroeconomic benefits of growth, employment, price stability and innovation. But there are misuses of FTAs of which India is a victim. Third countries are taking unfair advantage of the FTAs and exporting through member countries. It is a threat to our economy, jobs and balance of payments.

Government tightened the rules.
Government introduced a chapter in the Customs Act in the Budget of 2020, which placed the onus on Indian importers to prove that goods imported under the free trade agreement (FTA) adhere to the prescribed origin criteria. Under the provisions, the tax authorities have greater powers that permit them to temporarily suspend the preferential treatment, pending verification, or even disallow the claim under special circumstances without further

verification. New rules stipulate the detailed procedure to be followed for substantiating the benefits under the FTAs and the powers of verification of the authorities.

Published date : 15 Dec 2020 12:51PM