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The government is looking to plug loopholes in the Indian customs law provision that allows tax exemptions for gifts up to Rs 5,000 and trade samples up to Rs 10,000 sent to India from abroad.
Illustration: Dominic Xavier/Rediff.com
In a crackdown on Chinese e-commerce players such as AliExpress, Club Factory and Shein for evading duties through importing commercial consignments to India as gifts or samples, the government is examining a host of measures including a payment gateway solution.
Besides, an audit or return-filing mechanism through a central registration system for foreign online retailers catering for Indian buyers is another option being examined.
Putting an annual cap on the number of gifts an individual can receive from abroad is another solution on the table, according to official sources.
The government is looking to plug loopholes in the Indian customs law provision that allows tax exemptions for gifts up to Rs 5,000 and trade samples up to Rs 10,000 sent to India from abroad.
Currently, there is no limit on the number of gifts or samples an individual can receive, encouraging several Chinese e-commerce players to under-bill their shipments to evade customs duty and integrated goods.
This results in a hit of 42.08 per cent for the Indian government because “all dutiable articles intended for personal use imported by post or air” attract a 28 per cent integrated goods and services tax (IGST) over a 10 per cent social welfare surcharge on 10 per cent basic customs duty.
“We are examining and seeking feedback on solutions to check duty evasion through misuse of customs law, especially pertaining to gifting and sampling.
"One way is to have a tech-enabled payment gateway solution, ensuring that duty and the IGST are paid at the time of online payment by the buyer,” said a government official.
Besides, there could be a central registration system, which require these foreign e-commerce players selling to Indian buyers to file returns specifying descriptions of goods sold and the duty and IGST credited to the government on a daily or weekly basis.
There could be routine audits based on such return filings, the official added.
Mumbai customs had last year stopped clearing parcels shipped under the CB-12 (gift and samples) route.
The enforcement was followed by Bengaluru and Delhi last month.
The move has led to a sharp fall in gift consignments through these ports.
The Mumbai courier port, for instance, was processing close to Rs 71,835 of such gift consignments under the CB12 route in April last year, which fell to just two in April this year and zero from June onward.
Besides, overseas consignments under the CB13 route for low-value imports route have fallen by 30 per cent after the crackdown.
However, this may also indicate foreign e-commerce diverting such shipments to other ports like Kochi, Kolkata, and Chennai.
Mumbai Customs reportedly last month seized around 500 parcels of Shein and Club Factory.
The seizure order showed that a Shein warehouse stands sealed in Mumbai because it was found it undervaluing and wrongly declaring goods.
The new draft e-commerce policy unveiled earlier this year proposed a ban on all gifts shipped to India through the e-commerce route to prevent misuse of the “gifting” provision.
“We have outlined the need for a systems-driven solution for cross-border e-commerce to ensure no duty and GST evasion and make e-commerce imports seamless,” said Sachin Taparia, founder and chairman, LocalCircles.
“… we are carrying out public consultation where hundreds of inputs from various stakeholders have been received and by the end of the month, we will make the submission to the Central Board for Indirect Taxes and Customs (CBIC),” Taparia added.
M S Mani, partner, Deloitte India, pointed out that while there was a need to regulate courier imports and ensure that B2C transactions were not depicted as gifts, it was essential to avoid any disruptions to trade by imposing prohibitions on such transactions.
