Home/ Economy / Govt develops new metrics to fix China trade mismatch

NEW DELHI : The government has developed new valuation metrics for imports after unearthing large-scale under-invoicing and mis-declaration of steel imports from China aimed at evading basic customs duty and goods and services tax.

The Directorate General of Valuations under the Central Board of Indirect Taxes & Customs (CBIC) found that in April-July this year, stainless steel flat products of J3 grade were imported at an average value of 87 per kg as against the similar products of 201 grade imported at an average value of 163 per kg. In addition, similar products of 201 and J3 Dual Grade were imported at an average value of 149 per kg. The government now plans to issue a valuation study to sensitize the field formations to prevent such undervaluation.

This development comes amid reports that under-invoicing of imports from China have come under the government’s tax scanner, largely with regard to electronic goods, gadgets and metals. Under-invoicing is done to evade customs duty.

Mint reported on 1 November about the mystery of missing $12 billion in India-China trade in the January to September period. While China claimed that trade with India touched $103 billion in the first nine months of 2022, India’s data show that bilateral trade stood at just $91 billion.

This is thought to be largely due to under-invoicing of shipments by Indian importers to avoid paying import taxes.

Last year, while Beijing claimed that it was India’s largest trading partner, New Delhi countered it saying that the US remained its largest trading partner.

The difference in the trade figures reported by the two countries has widened from $5.2 billion in 2018 to nearly $12 billion now. According to a representation made by the Indian Stainless Steel Development Association to the government, “substantial" import of stainless steel flat rolled products of 201 Grade as well as 201/J3 dual is cleared at Indian ports at a much lower rate because the importer declares the goods as ‘J3 Grade’ by showing minor changes in chemical composition.

“By a very minor change in the chemistry, importer is able to show a difference which then translates into two different grades and leads to difference in the value," it alleged. An analysis by DG Valuation found that there is undervaluation in import of J3 Grade of SS flat products as compared to 201 Grade.

Ajay Sahai, DG and CEO, Federation of Indian Export Organisations (FIEO) said that it may make a case for levy of anti-dumping duties by India. “We would like to understand at what price the goods were exported from China as per China’s customs data and at what price the goods were imported by Indian importer as per Indian customs data. If there is a discrepancy, it is more of a case of undervaluation. But, if both are the same, it could be a case of dumping by China," said Sahai.

Queries emailed to the department of commerce, ministry of finance and the Indian embassy in China remained unanswered till press time. According to reports, customs authorities have issued notices to 32 importers since the last week of September for suspected tax evasion of about 16,000 crore through under-invoicing from April 2019 to December 2020.

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Updated: 20 Dec 2022, 06:30 AM IST
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