New Delhi: The customs department is set to reject benefits of import duty relief on any shipment from India’s free trade partner countries in South East Asia if Indian importers are not in a position to show that the product has undergone 35% of value addition in the exporting country, said a senior official.

The idea is to ensure that importers do due diligence on their shipments so that goods originating from China and routed through India’s free trade partner countries do not get customs duty concessions under the Asean free trade agreement (FTA), said the official.

New norms for verification of origin of imports under free trade deals will come into force on Monday. New Delhi has already banned a host of Chinese smartphone applications and tightened rules on foreign investment from countries with which India shares land borders after a border clash with China in June that left at least 20 Indian soldiers dead.

The Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 require the importer to take reasonable care to satisfy himself that the goods being imported and claiming FTA benefits meet the 35% value addition in the country of export, said the official, who spoke on condition of anonymity.

“Now the importer must possess all such proof and on being asked by the customs authorities, he shall have to produce these proof demonstrating the correctness of 35% value addition. A mere certificate by the exporters would not suffice,” said the official. If importers are not able to satisfy customs authorities that the imported goods have been manufactured with at least 35% value addition in the free trade partner exporting country, treaty benefits would be denied, said the official.

The new rules allow Indian authorities to initiate a further verification from the exporting nation and if no verification report is received within a specified time, duty relief will be denied. Also, if it is found that benefit has been wrongly availed of in the case of one consignment, FTA benefit would be denied in subsequent consignments of identical goods where country of export and exporter are the same.

The Asean free trade deal allows imports of most of the items from partner countries duty-free or at concessional basic customs duty rate. Countries such as Indonesia, Malaysia, Thailand, Singapore and Vietnam account for the bulk of imports into India under the trade deal.

Abhishek Jain, tax partner at EY, said that with effect from 21 September, businesses availing benefits of FTA would be required to comply with the revised bill of entry format, declaring additional particulars in relation to treaty benefits, and will be required to upload the copy of certificate of origin on the customs portal.

India adopted new rules after discovering that items from non-Asean countries were being diverted into India through these trade partner countries with mere repacking or minor processes and declaring 35% value addition to wrongly claim treaty benefits. This practice has been found to be rampant in the case of electronic items like mobile phones, television sets, set-top boxes, air conditioners, electronic parts and telecom equipment. Claims of duty benefit on these items from Asean region would be subjected to strict scrutiny, said the official.

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