– By Gunjan Prabhakaran and Abhishek Singhania
As the world shrugs off the crippling impact of the COVID-19 pandemic on the back of social distancing, advanced healthcare solutions, increased digitisation and reduced human intervention in order that not only we sustain but also drive trade growth. In sync with the best global practices, the focus of the Indian Government is to digitise complete tax administration. We have been witnessing significant transformative intervention by policy planners during the last few years.
The Customs Administrations and the cross-border tax landscape, however, are different and face various political and administrative pressures and challenges including fluctuating workloads with static or declining resources, greater business expectations and continued pressure to meet Government revenues, trade facilitation, social protection and national security objectives.
Post-pandemic, the increasing role of technology in Customs Trade and Administration has been a global phenomenon. The World Trade Organisation (WTO) has also recently conducted a study on the role of advanced technology in cross-border trade from the perspective of customs. The WTO found that the world’s focus is to secure cross-border trade through advanced technology with the help of blockchain, distributed ledger technology, big data, data analytics, artificial intelligence and machine learning (AI&ML).
The key finding of the study is that blockchain and distributed ledger technology can help provide better transparency, immutability and accessibility of information and data quality, as well as the sharing of relevant information on border management procedures among all stakeholders. It has also been observed that the Internet of Things (IoT) has been used to fully automate border-crossings and customs procedures in national ports, which includes the integration of X-ray scanners into a cross-border image exchange to analyse the results of multiple scanning stations centrally and the use of radio frequency identification antennas or e-seals to ensure traceability of goods and means of transport. IoT has provided better risk management, greater efficiency of customs clearance processes and improved analytics. It has also been observed that the customs authorities have embraced big data, data analytics and AI&ML with regard to risk management and profiling, fraud detection and ensuring greater compliance.
The Central Board of Indirect Tax and Customs (CBIC) is also working towards achieving the goal to digitise the overall Indirect Tax Administration, including the Customs Administration, with a focus on the goal of plugging revenue leakage along with providing trade facilitation. The CBIC has recently launched ‘Advanced Analytics in Indirect Taxation’ (ADVAIT), a 360-degree taxpayer profiling tool based on AI&ML wherein data analytics will play a critical role in achieving the synergy between various tax administrations operational in India. The CBIC has entered into a Memorandum of Understanding with other Tax Administration and Government Authorities like the Central Board of Direct Taxes and the Ministry of Commerce to integrate a complete profile of taxpayers for a better administration which will provide all data related to direct taxes, customs, goods and services tax and financials of taxpayers in one platform. The ADVAIT platform is considered a game changer for the CBIC in the digitisation of Indirect Tax administration.
The CBIC is also focussing on trade facilitation to automate tax compliances with the help of technology and digitisation and implemented several reform measures to smoothen trade across borders. In this regard, the CBIC has provided a centralised filing system for transactions related to cross-border trade in the Indian Customs Electronic Gateway (ICEGATE), the national portal of Indian Customs. The ICEGATE has launched various ancillary services for taxpayers for trade facilitation like ‘Compliance Information Portal’, which provides customs compliance requirements of import-export transactions to taxpayers, ‘Single Window Interface for Facilitating Trade’, which allows the facility to lodge custom clearance documents online at a single point, ‘Custom Duty Calculator’, ‘Custodian Registration’ through ICEGATE which will help custodian to maintain Uniqueness with each port mapping, ‘Registration Enquiry’ to users to check whether a particular PAN is registered with ICEGATE or not, ‘GSTN Integration’ to the users where GSTN has not integrated automatically, ‘CTO-ICEGATE Registration’ to register CTOs at ICEGATE for exchanging required data, ‘Cargo Summary Notification’ Enquiry wherein Authorized Notified Carriers (ANC) – Freight Forwarders, NVOCC, Consolidator would be able to check details related to Cargo/Bill of Lading (BL)/Container.
It is apparent that the Government of India is taking steps to use technology for Customs Administration and to improve ‘Ease of Doing Business’, however, these are still stepping stones because the two key regulations that drive cross-border transactions in India are the Customs Act 1962 along with the rules there-of (Customs Law) and Foreign Trade Policy and procedures (FTP) are governed by different ministries operative under the Government of India and data and compliances related to these two different regulations are also required to be integrated into a single platform along with specific transactions under the ambit of cross-border transactions like import and export by courier and baggage, transactions by Special Economic Zone (SEZ) and Free Trade Warehousing Zone (FTWZ).
Recently, many countries have adopted technology and achieved a better Customs Administration with the help of a single integrated portal for complete export, import, and transit procedures. Sweden was one of the first countries in the world to implement a national single window system for trade which has made the entire clearance process easy. Singapore, the Philippines and many members of the Association of Southeast Asian Nations have also agreed to integrate the single national window by allowing the electronic exchange of customs information and speeding up cargo clearance.
The Indian Government is gradually embracing technology in Customs Administration, however, cross-border trade involves careful involvement of technology and requires collation, sharing, processing and protection of data gathered from various locations around the world and require a standardisation of data with single window integration which would help avoid the appearance of inefficient governance systems and potentially prevent the proliferation of different blockchain solutions that are not interconnected. It would also be required to establish a data strategy to ensure improved data governance and quality and appropriate resources will be required to address the obstacles and challenges in introducing these types of technology, such as the cost and the need for expertise and good practices. It will be essential to have a level of caution and awareness of the obstacles and challenges of adopting these technologies, such as cost, lack of expertise, need for the Government strategy and legal issues. This awareness is a vital step in successfully reaping the benefits of the latest technology in Customs Administration and Trade Facilitation.
It has been observed that trade and industry in India are still facing undue hardship in carrying out the procedural compliances related to cross-border transactions because of the existence of multiple portals defeating the entire objective of compliance ease as envisaged by the Government through digitisation. Therefore, it is essential that the Indian Government adopts best practices from the world and provides a single window for all cross-border trade-related information and compliances.
(Gunjan Prabhakaran, Partner & Leader/ Indirect Tax and Abhishek Singhania, Director/Indirect Tax, BDO India)