Monday, February 6, 2023

2023 to be tough on trade as economies will slow down: GTRI

Announcement of measures such as quick refund of duties, resolving inverted duty issues and bringing exports through post and courier at par with standard customs clearances in the forthcoming Budget would significantly help boost the country’s outbound shipments, economic think tank GTRI said on Friday.
Most forecasts say that 2023 will be tough on trade as large global economies are slowing down for many reasons and in this backdrop some extra push would help the exporting community of India, the Global Trade Research Initiative (GTRI) said.
Budget 2023 is scheduled to be presented by Finance Minister Nirmala Sitharaman on February 1.
The think tank suggested five measures – credit all duty refunds into exporters account as soon as goods leave; reduce incidences of inverted duties as they weaken Make in India; use simple language in customs notifications; bringing exports through post and courier at par with standard customs clearances; and not allowing machinery import at zero duty for making products for the domestic market.
An inverted duty condition happens when duties on inputs are high, and on corresponding output is low. Expensive inputs make costly products that cannot compete in the export market. In the domestic market, such products are prone to cheaper imports.
These measures would help competitiveness of domestic exporters and that in turn would help increase the shipments, it said adding India’s merchandise trade exceeded USD 1.1 trillion in 2022.
It suggested a merger of the duty drawback and RoDTEP (Remission of Duties and Taxes on Exported Products) schemes into one and notification of product category wise rates as a percentage of export values.
“Both schemes have independent rule books and rate lists even though they apply for the same export consignment. Also, if an exporter forgets to tick the relevant column in the shipping bill, he gets no money even if he has exported and met all other conditions,” it added.
The government refunds the taxes paid on inputs used in making of export products and this money is coming down gradually. The average rate of refund as a percentage of export value used to be over 20 per cent two decades back and the average rate came down to about 10 per cent five years back.
Now the average rate is less than 4 per cent from both Drawback and RODTEP schemes, it said.
Talking about the language of customs notifications, the GTRI said their language is difficult to understand and companies have to hire experts to understand meaning and implications of those notifications.
For example, it said, finding the correct customs duty for a product is a pain and a firm needs an expert to wade through the maze of hundreds of customs notifications issued every year.
On bringing exports through post and courier at par with standard customs clearances, it said that with the challenging global economic situation, buyers insist upon quick deliveries and exports must be free to use the mode of shipment.
“Current rules require that shipments above the value of Rs 5 lakh cannot use India post and courier. Also, a product exported through a normal customs process gets benefits like Drawback and RODTEP, but no such benefit for the same product shipped from post or courier mode, it said.
Former Indian Trade Service officer Ajay Srivastava is the co-founder of GTRI. He took voluntary retirement from Government of India in March 2022. He has a rich experience in trade policy making, and issues related to WTO and FTAs.

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