Policy to boost exports on anvil as trade deficit hits new high of $176 bn

The Central Board of Indirect Taxes and Customs (CBIC) has set up a working group to look into export promotion policy, the impact of free trade agreements (FTAs) signed by India, tariff concessions vis-à-vis non-tariff barriers faced by exporters, and facilitating e-commerce exports.

“We are looking into issues faced by exporters amid intense competition in the international market. The idea is to look at our policies comprehensively from the perspective of export, manufacturing, and trade facilitation,” a CBIC official said.

The move comes as India’s trade deficit, the gap between exports and imports, reached a high of $176 billion in 2018-19. Exports touched $331 billion last year, but fell short of the government’s internal target of $350 billion. India’s FTAs have been criticised for being skewed in favour of the partner country, which has led to a widening of the trade deficit. 

While the Department of Commerce is doing the impact study, the Customs working group is going to examine these agreements from the revenue perspective. “We are studying whether the revenue foregone due to various FTAs has been offset by any benefit to our economy,” said another official.

According to the tax revenue numbers given by the Controller General of Accounts, Customs realised the Revised Estimates target of Rs 1.3 trillion, largely on the back of hike in basic Customs duties on several tariff lines including air conditioners, refrigerators, washing machines, aviation turbine fuel, and telecom and communication equipment.

Besides, the panel will look at the quality and cost of services provided by intermediaries in the Customs environment like shipping lines and Customs brokers.

The Customs department is looking at popularising the manufacture-in-bond under Section 65 of the Customs Act, wherein manufacturers can import duty-free for export in the bonded warehouse.          

“We want push the scheme to a few export-oriented sectors like apparel, gems and jewellery, carpets, handicrafts, and electronic equipment,” said the official.

“We are also planning to go for only record-based supervision and do away with physical supervision in bonded warehouses for most cases,” he said.

With the introduction of the goods and services tax (GST), bonded warehouses are more favourable for exporters as complications arising under central excise law on what would or would not be synonymous with manufacture are gone. Only the GST or the integrated GST is being levied now, allowing a free flow of goods.

There are no geographical restrictions to set up in-bond warehouses and this does not require approval from the interministerial board as in the case of export-oriented units and special economic zones.

Imports of raw materials and capital goods are duty-free till their final clearance.

The CBIC had last year allowed a single-bond as well as an integrated digitised accounting form.

India’s rank on trading across borders took a quantum leap from 146 to 80 in the ease of doing business report released by World Bank last year.

“As global trade is showing signs of moderation, competition is set to increase. Therefore, all-round efforts are needed to impart competitiveness to our exports, including trade facilitation, which Customs is attempting,” said Ajay Sahai, director general and chief executive, Federation of Indian Export Organisations.

Customs has also come out with a national trade facilitation action plan, which provides a road map for meeting India’s commitments under the trade facilitation agreement.

Working group to look into...
  • Tariff concessions vis-à-vis non-tariff barriers faced by exporters 
  • Need for non-preferential rules of origin and their structure
  • Cost of services provided by Customs brokers, shipping lines, forwarders
  • Facilitation of e-commerce exports
  • Manufacture-in-bond under Section 65 of the Customs Act

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