World Trade Organization Organisation Mondiale du Commerce Organización Mundial del Comercio

Pakistan 2:

The Secretariat report has mentioned that India's tariff structure is complex. To determine the applied border charges for a particular product, separate primary (schedules) and secondary (notifications) related to customs, central excise and state legislations must be consulted. Besides, updated schedules and notifications of state levies are also usually not available electronically. India is requested to elaborate the following issues:

a) Additional duty (CVD) and special duty (Special CVD) are stated to be in lieu of state/domestic taxes, whereas many states also apply certain taxes on imported products separately. Besides, while calculating Special CVD, these levies are charged on cumulative value of basic duty + CVD + central excise education cess +customs education cess. Accordingly, the charge on the customs value of imported goods, in fact, exceeds 4%. India may elucidate why special duty (Special CVD) may not be considered as para  tariffs which are not WTO compatible.

b) Similarly, education cess is charged on custom value + basic duty + CVD. Its incidence on imports is thus beyond the cess on domestically produced goods. Why this levy may not be considered as para tariff.

Reply: Additional duty (CVD) is in lieu of excise duty payable on like domestic goods while special CVD is in lieu of state VAT, sales tax or other local taxes and charges. Special CVD is charged on the cumulative value of basic duty + CVD + education cess because state VAT is also charged on domestic goods on their value inclusive of excise duty and education cess. This is consistent with WTO provisions and does not render special CVD a "para tariff". States do not charge taxes on imported goods at the time of import.

The levy of additional duty (CVD) and Special Additional Duty (Special CVD) are collected at the time of import so as to provide a level playing field for domestic industries. Exemption from special CVD is available to goods imported for subsequent sale by way of a refund which can be claimed if proof of payment of VAT on the imported goods is produced. CVD is charged on landed cost basis. Special CVD is charged on the total importation cost basis so as to provide equivalence with the domestic industry who have to pay VAT on a value inclusive of excise duties.