Customs authorities would be closely watching imports of these products coming from countries with which India has FTAs, from September 21, officials in the finance ministry said, in order to curb evasion of custom duty and rampant misuse of such agreements that was hurting domestic industry.
“Customs may also ask for supporting documents and information and when in doubt, deny the benefit of the FTA duty concession or allow it provisionally pending verification,” one of the officials added.
While India’s exports to FTA partner countries remain almost flat under major agreements, imports rose rapidly leading to a widening trade deficit.
In case of ASEAN countries, the merchandise trade gap rose from $5 billion in 2010 to over $22 billion at present. From a position of a surplus of $2 billion with Vietnam, at the start of FTA in 2010, India now has a trade deficit of about $3 billion with it. Same is the case with Singapore where trade deficit is over $4 billion. The trade gap has widened with Malaysia, Thailand and Indonesia.
“FTAs were expected to be mutually beneficial to all partner countries. However, this is not the way the trade under FTAs has progressed,” an official said.
Products like smartphone, TVs, set-top box, digital camera, parts of mobiles, etc coming from this route from Vietnam, Thailand and Malaysia, for instance, have not met with rules of origin criteria, investigations have revealed.
“Last year, DRI detected a large-scale fraud wherein Arecanut from a third non-FTA country was being imported into India from a FTA partner country, duly covered by Certificates of Origin which was found to be incorrect… In some cases restricted goods were being smuggled,” a second official said. Similar misuse was found in black pepper, cocoa powder.
In last five years, the Customs have detected fraudulent claims under FTA to the tune of Rs 1,200 crore.
Finance ministry issued new rules for administration of Rules of Origin under FTA – which will come into effect from September 21 – which puts the onus of verification on importers, so that they must satisfy the origin criterion for availing duty concession.
Strict timelines for verification from the exporting country would ensure that the misuse is stopped, officials added.