World Trade Organization Organisation Mondiale du Commerce Organización Mundial del Comercio

SWITZERLAND

Switzerland 1:

Report by the Secretariat: I. Economic Environment (2) Recent Economic Developments: Para. 7:

More than half of India's workforce still depend on the highly unproductive agricultural sector while the manufacturing sector employs only 22% of the (organized) labour. What is India's strategy to shift employment from agriculture into the more labour intensive industrial sector?

Reply: The share of the manufacturing sector in GDP has been stagnant at around 15% over the years and the sector is a low contributor to employment. The Government realises the importance of the sector in job creation, and is finalizing a policy with a view to raising the share of manufacturing in GDP to 25%. It aims to promote industries with the competence to leverage the growing opportunities at home and abroad.

Switzerland 2:

Report by the Secretariat: I. Economic Environment (2) Recent Economic Developments: Para. 11:

Taking into account "the relatively large segment of non organized (not formally employed) workers" in India, we wonder whether reforms in India's labor laws could facilitate the shift of India's workforce from the non organized to the organized sector. Is India currently assessing whether the shift from non organized workforce to the organized sector may be promoted by reforming its labor laws?

Reply: Stability in the relationship between employers and employees is important. Therefore, the endeavour of the government has been to bring about labour reforms by following a consensual approach and to maintain harmonious industrial relations through effective interventions of Central and State industrial relations machineries.

Switzerland 3:

Report by the Secretariat: I. Economic Environment: (3) Fiscal Policy: Para. 14:

Since improvements in infrastructure are required (Para. 5) and "since tax revenue continues to be insufficient to finance India's infrastructure and developmental needs" (Para. 14), we wonder whether India is going to adopt additional policy measures to improve the investment climate in order to attract more private infrastructure investments, including investments from abroad. What concrete policy measures is India going to adopt in order to attract additional private infrastructure investments, including foreign investments?

Reply: A roadmap on fiscal consolidation envisages prudential expenditure management through which the Government of India will generate resources to meet the development needs of various sectors. As part of expenditure correction, the Government has established a practice of extending subsidies in cash in order to bring down overall subsidy related liabilities. The public sector is vastly enhancing its use of the public private partnership (PPP) mode for project financing. This enables fiscal space for the provision of public goods in development sectors where such finance is unlikely to be forthcoming.

A number of social and economic services are provided both at the Centre and in States for which rates of recovery of costs could improve through better user charges.

Revenue from non tax sources could increase with better policies in the use of scarce resources/assets of the nation. The increasing use of auction mode in this regard would help garner resources.

Switzerland 4:

Report by the Secretariat: I. Economic Environment:  (3) Fiscal Policy: Para. 23:

Switzerland has made very good experiences with the so called "debt break mechanism" in public finances introduced into the Federal Constitution by popular vote in 2001. Since "[t]here are no explicit debt caps or limits" in India, we were wondering, whether discussions are going on in India at the moment, to introduce such a mechanism in order to promote a financially sustainable management of public finances. Is India intending to introduce such a capping mechanism to limit its public debt?

Reply: The FRBM (Fiscal Responsibility Budget Management) Rules 2004 contain an incremental assumption rule for public debt which states that "the Central Government shall not assume additional responsibilities (including external debt at current exchange rate) in excess of 9% of GDP for the financial year 2004 05 and in each subsequent financial year, the limit of 9% of GDP shall be progressively reduced by at least one percentage point of GDP". Hence a limit is set on public debt as a proportion of GDP. Through limiting the growth of public debt relative to growth in nominal GDP or through lower assumption of incremental liabilities or retirement of debt, the public debt would decline to sustainable levels in reasonable time. The suggested roadmap on fiscal consolidation will help in reducing the debt to GDP ratio from 44.2% in BE 2011 12 to 41.5% by 2013 14.

The FRBM rules prescribe a cap of 0.5% of GDP in any financial year on the quantum of guarantees that the Central Government can assume in a particular financial year which would put a limit on the stock of contingent liabilities and for better management of contingent liabilities the government guarantee policy has been framed which lays down the principles to streamline the liability management by the Government.

Switzerland 5:

Report by the Secretariat: II. Trade Policy Regime: Framework and Objectives:  (4) Investment regime: Para. 26:

In spite of considerable improvements over the review period, doing business in India still requires overcoming 12 procedures with differences in rules at the state level. What is India's strategy to reduce the adverse effects of cumbersome and lengthy administrative processes on the business and investment environment?

Reply: The report of the World Bank is not representative of the business environment across the country. The sample size and the statistical universe are very limited in size. Government is reviewing the FDI policy and regulations, on a continuing basis, with a view to their further liberalisation and increasing their investor friendliness.

Switzerland 6:

Report by the Secretariat: II. Trade Policy Regime: Framework and Objectives:  (4) Investment regime: Para. 39:

It is a declared aim of the Indian government to attract increased FDI. However, the number of sectors/activities in which FDI is prohibited increased during the review period. How does India explain this contradiction?

Reply: The list of sectors prohibited under both the Foreign Exchange Management Act and FDI Policy as extant at the time of the earlier review, was subsequently consolidated under the FDI policy, vide Press Note 7 (2008), which is available in the public domain. Only one additional sector i.e. "manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes" has since been added. This has aligned the policy with Government's earlier decision of not granting industrial licenses for fresh capacity in the sector.

Switzerland 7:

Report by the Secretariat: II. Trade Policy Regime: Framework and Objectives:  (4) Investment regime: Paras. 27, 39, and Table II.8:

What is the relationship between the total ban of FDI in the manufacture of "cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitute" and the compulsory requirement for industrial licensing in "Cigars and cigarettes of tobacco, and manufactured tobacco substitutes"? Does it mean that domestic production of tobacco products is allowed whereas foreign producers of tobacco products are not allowed to enter the market? If this is the case, could India explain the rationale for the unequal treatment of foreign investors interested in manufacturing in India compared to domestic manufactures?

Reply: No industrial license for creation of new capacity or addition of capacity has been permitted in the tobacco sector since the year 2000. The decision to prohibit FDI in the manufacture of "cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes" has aligned FDI policy with the domestic situation.

Switzerland 8:

Report by the Secretariat: III. Trade policies and practices by measure:  (2) Measures directly affecting imports: (i) Customs procedures: (a) Registration and documentation: Para. 11:

Could India explain the functioning of the EDI [electronic data interchange] system? For example, can importing companies other than shippers/customs brokers register and use this system? [If not, why not?] Do foreign invested importers have access to use the EDI on the same terms as Indian importers? [If not, why not?]

Reply: Indian Customs launched the Indian Customs EDI system (ICES) in 1995, as an automated work flow system for clearance of import and export consignments. The key drivers for this were the need for handling larger volumes of international trade, lowering transaction costs, quicker turnaround times for cargo and efficient information sharing with Customs Community partners Document filing was initially facilitated through use of service centers. A remote EDI system (RES) was also provided to enable remote filing of import and export documents from business premises of users. The architecture of the ICES application has recently been modified and the new ICES 1.5 now runs on an upgraded centralized platform, with strengthened security features.

Any company can use the EDI system as long as they register and obtain the Import Export Code (IEC) from the Ministry of Commerce (DGFT). The foreign invested importers have access to use the EDI on the same terms as Indian importers as long as they have the IEC.

Switzerland 9:

Report by the Secretariat: III. Trade policies and practices by measure:  (2) Measures directly affecting imports: (ii) Customs valuation and clearance: Para. 21:

The final sentence of paragraph 20, as well as paragraph 21 indicate that the transaction value includes transport costs as well as a landing charge. Could India confirm whether or not duty is collected on these amounts and, if so, how it corresponds to the definition of transaction value under articles 1 or 8 of the Agreement on Customs Valuation?

Reply: Article 8.2 of the CVA states that, in framing its legislation, each Member shall provide for the inclusion in or the exclusion from the customs value, in whole or in part, of the cost of transport of the imported goods to the port or place of importation and of the loading, unloading and handling charges associated with the transport of the imported goods to the port or place of importation. India has provided for the inclusion in the assessable value of the cost of transport of the imported goods to the port or place of importation and of landing charges which represent the cost of unloading and handling charges of the imported goods at the port of importation.

The duties are levied on the customs value of goods which includes the cost of transport of the imported goods to the port or place of importation, the unloading and handling charges of the imported goods at the port or place of importation and the cost of insurance.

Switzerland 10:

Report by the Secretariat: III. Trade policies and practices by measure: (2) Measures directly affecting imports: (ii) Customs valuation and clearance: Para. 22:

Could India explain the purpose of using reference prices, and how the use of such values corresponds to the valuation hierarchy established in the Agreement on Customs Valuation? Second, the revision of "tariff values" every two weeks and on the basis of international market prices could prima facie appear to be a "variable import levy" rather than an "ordinary customs duties" within the meaning of article 4.2 of the Agreement on Agriculture (and refers) and operate similarly to a safeguard mechanism. Could India elaborate on whether the values are aligned with international market prices?

Reply: Tariff values have been notified for palm oils, crude soybean oil, poppy seeds and brass scrap. Tariff values are computed on the basis of prevailing international prices of these goods as observed from the various reputed international journals and other publications.

The tariff value system promotes greater uniformity and certainty in assessment practice. It checks undervaluation and thus acts as an important policy instrument for collection of appropriate amount of customs duty.

The tariff values are neither arbitrary or fictitious values nor minimum customs values. As these values on identified goods are fixed on the basis of prevailing international prices, that is to say, the prices at which these goods are sold or offered for sale in the ordinary course of international trade under fully competitive conditions, such values are not inconsistent with Article VII of the GATT 1994. These values are in fact floating values and are frequently reviewed and revised so as to keep them closer to the transaction values under Article 1.1 of the CVA.

The tariff value is a value for customs purposes. Customs duties are levied on this value. The tariff value is neither a "variable import levy" nor does it operate as a safeguard mechanism.

Switzerland 11:

Report by the Secretariat: III. Trade policies and practices by measure:  (2) Measures directly affecting imports: (ii) Customs valuation and clearance: Para. 25:

With regard to paragraph 25:

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  Could India elaborate on the rationale for applying maximum retail prices on certain products and particularly the regime applicable to medicaments referred to in footnote 41? Does India conduct on going reviews of the operation of this measure in order to ensure that its application does not result in de facto quantitative restrictions within the meaning of article XI?
  
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  How does India ensure that the application of the abatement does not lead to discrimination by resulting in a higher value for imported products on which additional duties are calculated [by way, for example, of reports]? Finally, could India kindly provide the list of the 143 items with HS codes and the abatement applied to each of them?
  

Reply: The MRP based levy was introduced with a view to reducing valuation disputes. Under the provisions of Standards of Weights and Measures Act, 1976 (now Legal Metrology Act 2009), as a measure of consumer protection, packaged items, inter alia, are required to indicate the maximum retail price (MRP). For medicaments, a similar requirement emanates from the provisions of the Drugs (Prices Control) Order 1995. Since the MRP is known, for certain specified items prone to valuation disputes, Government has provided that for these items the tax base will be the MRP subject, however, to certain abatements from the MRP.

This MRP based assessment is applied to import goods because the determination of the value for like domestic goods for the purpose of charging excise duty is also done on this basis. The rates of abatement are reviewed from time to time. The method and the rates of abatement are identical for imported and domestic goods. Hence, there is no discrimination against imported goods. As such, the application of MRP based assessment does not result in de facto QRs within the meaning of the GATT 1994.

The list of items is available in notification No. 49/2008 CE (N.T.) dated 24 December 2008, as amended from time to time.

Switzerland 12:

Report by the Secretariat: III. Trade policies and practices by measure:  (2) Measures directly affecting imports: (iii) Tariffs: (a) Applied tariff structure: Para. 27:

According to para. 27 (and to para. 2 in the introductory part), the tariff structure of India is very complex. In addition, traders as well as customs officers must consult several documents in order to know the effective amount of customs charges to be charged by import. The "effective" tariff may also be modified in the course of the year. The result is that the separate customs and excise tax schedules must be cross checked with any applicable customs or excise notification that may have raised or reduced the rate on the imported product. Which measures does India envisage to take in order to simplify its tariff structure? In particular could the Indian authorities envisage to include all these information in an online version of the import tariff and make it freely available in order to facilitate trade?

Reply: The tariff structure has been simplified considerably in recent years. However, this is an on going process. The present duty structure is simple though there are certain exemptions. It is Government's endeavour to gradually remove exemptions which are no longer relevant in the changed circumstances.

Steps have been taken to simplify the process of assessment of customs duties. With the adoption of the Electronic Data Interchange (EDI) system and automation of businesses, the rates of duty and exemptions are automatically determined.

All notifications relating to tariff changes are published in the Official Gazette and are made available on the official website. Steps are being initiated by the Government to put in place a user friendly, updated, online tariff.

Switzerland 13:

Report by the Secretariat: III. Trade policies and practices by measure:  (2) Measures directly affecting imports: (iii) Tariffs: (b) Bound tariffs: Para. 33:

According to para. 33, only some 75% of India's tariffs are bound. Could India provide information (product, HS code and level of duty) on how many times since 2005, it had to raise its applied duties in the case of bound tariff lines as well as unbound tariff lines?

Reply: This information is being compiled and would be furnished shortly.

Switzerland 14:

Report by the Secretariat: III. Trade policies and practices by measure:  (2) Measures directly affecting imports: (v) Other charges affecting imports: Paras 42 – 46 and 50:

With reference to paragraphs 42 to 46 and 50, a number of Swiss industries raised the issue that the number, complexity, variation by region and levels of India's various duties and charges make it difficult for them to ensure predictability in their business relations. As shown in table III.8, these duties and charges can double or even triple the MFN applied rate. Switzerland would therefore welcome any information India might provide on any reforms it may be planning to streamline and reduce the burden that such additional duties and charges represent. In particular, any information about creating an Advanced Ruling system that would provide a binding assessment regarding these duties and charges   in addition to the items mentioned in paragraph 17 above   would be of interest.

Reply: The duties and charges as mentioned in the aforementioned paragraphs are in the nature of charges equivalent to internal taxes applied at the border in order to provide level playing field for the domestic industry. In case the domestic duties are reduced, equivalent reduction takes place in case of imported goods too. For example, with reduction in the standard rate of excise duty from 16% in 2007 08 to 10% now, the rate of additional duty of customs has also come down to that rate.

India has already put in place advanced ruling system to issue binding rulings on classification, valuation, duties etc.

Switzerland 15:

Report by the Secretariat: III. Trade policies and practices by measure: (2) Measures directly affecting imports: (v) Other charges affecting imports: Para. 46:

According to para. 46, the objective of Indian authorities is to eliminate the cesses once the Goods and Services Tax is implemented. Could India provide detailed information as to when the Goods and Services Tax will replace the cesses as well as to the structure of the tax and on which basis it will be levied. How will the new tax simplify the current system of cesses?

Reply: All cesses are supposed to be subsumed in the goods and service tax (GST). For GST to be introduced the first step is the amendment in the respective taxation powers of the Union and the States in the Constitution. A constitutional amendment bill has been introduced in Parliament in March 2011. The time frame for introduction of GST would depend on the time within which the bill is passed.

Switzerland 16:

Report by the Secretariat: III. Trade policies and practices by measure:  (2) Measures directly affecting imports: (vi) Import prohibitions, restrictions and licensing: (b) Import licensing: Para. 55:

According to para. 55, it is not clear which products require automatic license and which require non automatic license. Could India provide a detailed list of these products (product description, HS code)?

Reply: This is being worked out and will be notified to WTO.

Switzerland 17:

Report by the Secretariat: III. Trade policies and practices by measure:  (2) Measures directly affecting imports: (viii) Contingency Measures: (a) Anti dumping and countervailing measures: Overview: Para. 73:

According to para. 73, anti dumping investigations may be initiated by the Directorate General of Anti Dumping and Allied Duties (DGAD), in the Department of Commerce, upon a written application by or on behalf of domestic industry, or on its own initiative if there is justification to launch an investigation. Could the Indian authorities indicate on the basis of what type of justification an anti dumping investigation would be launched ex officio? Also, could the Indian authorities explain why the Government needs to initiate an anti dumping investigation if there is no demand to that effect from the domestic industry? Could the Indian authorities further explain how an ex officio initiation is consistent with the standing requirements of Article 5.4 of the WTO Anti dumping Agreement if no request to initiate an investigation has been received from the domestic industry (petitioners must indeed account for at least 25% of total domestic production of the like product and the domestic producers expressly supporting the application must account for more than 50% of the total production of the said product)?

Reply: The following provision in sub rule 4 of India's Anti dumping Rules is a kind of exception clause in the Rule 5, which relates to initiation of anti dumping investigation: "(4) Notwithstanding anything contained in sub rule (1) of the anti dumping rules the designated authority may initiate an investigation suo moto if it is satisfied from the information received from the Commissioner of Customs appointed under the Customs Act, 1962 (52 of 1962) or from any other source that sufficient evidence exists as to the existence of the circumstances referred to in clause (b) of sub rule (3) of anti dumping rules."

Thus, anti dumping investigation can be initiated ex officio under the above Rule which is in conformity with article 5.6 of the WTO Agreement on Anti dumping.

There has been no ex officio initiation by India under this provision during the review period.

Switzerland 18:

Report by the Secretariat: III. Trade policies and practices by measure:  (3) Measures directly affecting exports: (iii) Export taxes, charges, and levies: Para. 131:

According to para. 131, "export taxes are used to ensure domestic supply of raw materials for higher value added industries, promote further processing of natural resources, ensure an "adequate" domestic price, and preserve natural resources". Export taxes act as an indirect subsidy to the downstream industry. In a recent WTO panel report the panel stated that "Measures that increase the cost of certain raw materials for foreign consumers and decrease to domestic consumers are difficult to reconcile with the goal of protecting the environment or conserving these raw materials". As export taxes have a restrictive effect on export and for the reasons explained above, couldn't India consider and take other more efficient measures than export taxes to ensure domestic supply of raw materials?

Reply: India maintains export tax on a very limited number of items and is reviewed from time to time. These duties/taxes are not inconsistent with the WTO provisions.

Switzerland 19:

Report by the Secretariat: III. Trade policies and practices by measure:  (4) Measures affecting production and trade: (i) Incentives: (b) Other support: Credit policies: Para. 182:

1.