Importing under FTA tightened with rejig of Rules of origin

Aug 24, 2020 Indian businesses looking to import under free trade agreements (FTAs) will now closely look into their supplier’s manufacturing process and ensure that minimum threshold value addition is met as the country unveils new framework for rules of origin. “Trade will need to look at tariff shift and value addition, the two key elements of FTA, which are technical in nature, critically going forward to avail the benefit,” said Rahul Shukla, executive director-indirect tax at PwC.

All exporters may not have elaborate procedures and standard operating procedures to seek confirmations from their supplier, he added, which may lead to increased compliance burden.

India has notified new rules of origin that aim to provide more teeth to revenue authorities to check misuse of trade agreements to route third country goods. India is reviewing its FTA strategy to prevent their abuse.

Experts say the modified rules are set to increase dependence of importers on the suppliers.“These rules will increase dependence on exporter who may not share manufacturing or value addition details to keep commercial information confidential,” said Harpreet Singh, partner-indirect tax at KPMG India.

“Genuine importers may face difficult interpretation given that the onus to prove the country of origin is on the importer and elaborate documentation may be required in case processing//value addition on the product happens in multiple countries,” said Bipin Sapra, partner-indirect tax at EY India.