Govt should cut import tax on goods to lessen need for export schemes: GTRI

Reducing import duties on inputs and capital goods could help the government cut down the need for many of the existing export schemes, think tank GTRI said on Friday.
This would be an important step as India continues to face challenges in managing these incentives within the framework of international trade laws, it said.

The Global Trade Research Initiative (GTRI) said that many countries, including major trade partners of India like the European Union (EU) and the US continue to declare Indian schemes as subsidies and punish exporters by charging countervailing duties.

America and the EU account for over 20 percent of the country’s total outbound shipments.

At present, India is implementing many schemes to facilitate exports. These include the Advance Authorisation Scheme (AAS), Export Promotion Capital Goods Scheme (EPCGS), Duty Drawback Scheme (DDS), the Remission of Duties and Taxes on Exported Products (RoDTEP), Special Economic Zones (SEZ), Export Oriented Units (EOUs); Pre-shipment and Post-shipment credits banks, and Interest Equalization scheme (IES).

These schemes aim to enhance Indian products’ competitiveness in the global market.
GTRI Co-Founder Ajay Srivastava said the EU and the US and many others have frequently viewed these schemes as subsidies, and imposed countervailing duties, neutralizing the monetary advantages India provides to its exporters.

The primary contention of these countries is that these schemes violate the World Trade Organization’s (WTO) Agreement on Subsidies and Countervailing Measures (ASCM).

Faced with these challenges, the Indian government needs a multi-pronged approach, and that includes improving the structure of export schemes; actively raising disputes in WTO; resisting premature withdrawals of schemes; and rationalising customs duty structure, he said.

Currently, India’s average tariff or customs duties for industrial products is 14.7 percent, compared to the EU’s 4.1 percent.

Many of India’s export schemes, like SEZ, EOU, RoDTEP, and Drawback, exist because of such high import duties. Exporters use these schemes to either get a refund of duties paid or to be exempt from paying import duties.

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