The Central Board of Indirect Tax and Customs (CBIC) has asked domestic industry players to come up with a detailed and long-term solution to combat the Customs duty evasion by foreign sellers who are currently exploiting a loophole in the law. Recently, the Mumbai Customs department clamped down on gift imports since it found that many foreign sellers were evading customs duty by categorizing their products as gifts. According to the Foreign Trade Act, gift items of a value of up to ₹5,000 received from foreign countries to people residing in India are exempted from customs duty. Domestic industry players brought to the notice of the Customs Department that several e-commerce companies, especially from China, were delivering orders to their India-resident customers by disguising their products as gifts so as to evade the Customs duty that would normally be applicable on the products.
In April, the Mumbai Customs Department banned the import of gifts, following which the courier import traffic at the Mumbai airport more than halved. The Delhi and Bengaluru Customs Departments have also taken note of this activity and are clamping down on the import of gifts. However, industry players say that these gift imports are still continuing in large numbers at other ports of entry. “However, they [gifts] are still entering India through other ports like Kolkata, Kochi, Chennai, Hyderabad, etc, and through the Indian postal channel,” Sachin Taparia, founder, chairman and CEO of LocalCircles wrote in a letter to the CBIC. “Also, the postal channel is not proactive about engaging Customs officials when gift shipments arrive.”
The CBIC has now asked the domestic industry to come up with a detailed plan by the end of the month to plug these loopholes. One of the suggestions being mooted is the imposition of a flat rate of tax and Integrated Goods and Services Tax to be applied on all items imported from e-commerce companies. This way, gifts can be distinguished from e-commerce purchases. “The idea is not to curb the import of gifts, that is not the approach we want to take,” a member of the CBIC told The Hindu. “We want to stop the people illegitimately using the gift provision to bring in their goods, rather than the people legitimately sending gifts.” Another approach being favored is to integrate the payment portals of the e-commerce companies with the CBIC so that when a payment is made for a product that has to enter India, the CBIC has the barcode and other details it can match with the product when it physically arrives at a port of entry.