The government is gearing up to position India as one of the leading economies in the global landscape. As a step towards fulfilling this objective, the Union Budget 2011-2012 introduced various measures to streamline the Indian taxation regime. One such key measure is the transition from the customs controlled process governing the import or export of goods to a self-assessment based clearance of goods.
For customs purposes, self-assessment based clearance of goods shifts the onus of assessment of goods from the customs authority to the importer or exporter of goods. It is the responsibility of the importer or the exporter to ensure that aspects such as classification, duty rate, and value of goods are appropriately factored at the time of self assessment. Further, the mandate of the customs authority to assess every bill of entry or shipping bill for allowing clearance of goods has been replaced with verification of self-assessment pertaining to such bills of entry or shipping bills or re-assessment by the customs authority on risk based parameters. This is a measure aimed at facilitating trust based compliance management in respect of goods which are imported into or exported from India.
As a corollary to the measure dealing with clearances based on self-assessment, on-site post clearance audit at the premises of importer or exporter has been introduced to protect the interest of the Revenue. This measure empowers the customs authority to inspect the account books of the company and to verify each import or export related declaration or documentation. In a recent letter to the exporters association, it was clarified that at present the onsite audit scheme will not be applied to exporters. The on-site audit scheme is expected to be implemented in a phased manner.
Self-assessment based clearances coupled with measures involving on-site audit at the premises of the importer would therefore lead to greater accountability of the importer on customs assessment and higher visibility of trend in imports, financials of the company and transfer pricing documents.
Efforts for amending the customs legislation to factor the consequential changes are underway. Draft circulars inviting comments of the trade on the regulations pertaining to ‘provisional duty assessment’ and ‘on-site post clearance audit’ is a step in this direction. These regulations outline the obligations of the importer and exporter, penal consequences for non-compliance and the procedure covering the manner in which the on-site audit is to be conducted.
In addition to the legislative changes, internal systems and processes of the Customs department are also being re-aligned to factor the above changes. The customs officers however need to be trained to ensure that the implementation of these changes does not lead to sensitive business information being compromised or procedural hurdles being created for minor non-compliances. The industry on the other hand would also have to develop systems and processes to adapt to this change.
In conclusion, the customs department and the industry need to jointly work towards successful implementation of the above measures. This would lead to achieving the equilibrium between trade facilitation concerns and protection of interest of the Revenue.
Rajeev Dimri (Rajeev.dimri@bmradvisors.com), of BMR Advisors - Taxand, India.
