Union Budget FY22: Decoding changes in customs law

February 24, 2021 6:50 AM

Evolving the customs regime into a future-proof, interactive and self-reliant one

This will go a long way in culling exemption notifications which either lose their relevance or become outdated for whatever reason.This will go a long way in culling exemption notifications which either lose their relevance or become outdated for whatever reason.

By Rajat Bose & Neeladri Chakrabarti
The Union Budget FY22 has made some interesting changes with respect to customs laws. While some have been made in light of forthcoming commitments to the adoption of international customs conventions (like the HS 2022) which is the seventh edition of the Harmonized System of Nomenclature coming into force from January 1, 2022, others include facilitating ease of doing business by pushing greater electronic adoption in filing customs documents and executing amendments in documents on record. New introductory changes include the introduction of the Agriculture Infrastructure and Development Cess (AIDC), which is packaged and imposed as a ‘cess’ and not a duty of customs and the sun-setting of exemption notifications in a period of two years from the date of notification.
Ease of Doing Business: It has become the go-to initiative of the government of India.

Innovative steps in this regard have been taken from time to time including introduction of faceless assessment scheme, electronic filing of import general manifest and sea customs rules, E-Sanchit single-window system for expedited clearance of import goods, etc. The Budget this time has proposed innovative steps to carry forward this message and facilitate customs trade across ports in India.

A common complaint from the trade has been the delay in filing and processing amendments to documents which are already in process in the Indian Customs EDI System (ICES). A reason for this delay was often the lack of availability of a proper officer with access to the relevant ICES module, lack of technical awareness to operate the correction module and other systemic ‘ghosts in the machine’. This Budget has attempted to address this problem by allowing specific amendments on a self-assessment basis by the concerned importers or exporters, without waiting for a manual approval from the concerned officer.

This automated machine-enabled approval will go a long way in clearing up cobwebs in the system and the trade will possibly no longer have to wait at the mercy of a technically competent officer at a customs port to move their documents along the system.

To encourage paperless processing, and possibly to shoehorn the Indian Customs Electronic Gateway (IceGate) portal—which provides e-filing, registration and payment services to exim trade—into a more progressive and interactive avatar, the Common Customs Electronic Portal (CCEP) has been proposed. The CCEP is to be the next step for seamless interaction between the trade and customs authorities, and if considerate integration with the GSTN, DGFT and other electronic gateways can be achieved, it will be a major step towards furthering paperless processing.

The intent of rationalisation of the First Schedule to the Customs Tariff Act with effect from January 1, 2022 (around 351 items are proposed to be rationalised), is also an indicator of the commitment of Indian customs to the global HSN convention of the World Customs Organisation and the adoption of HSN 2022.

To scrap dwell time at customs ports, it has been proposed to allow importers to file a Bill of Entry at least one day prior to the arrival of cargo. This is a limited step taken to adopt standards being followed all over the world. While some importers are given the facility to file deferred Bill of Entry in India, the accepted standard internationally from the EU to the US ranges at a time gap for advance Bill of Entry from 7-14 days.

Given that our electronic systems are notorious for being ‘not-available’ at crucial times, mandatory filing of at least one day in advance will help in moving cargo faster through the system rather than waiting for the process to start once the goods arrive at a port. This is a good departure from the usual reactive approach followed by the customs authorities and will provide some solace to importers, especially importers of time-sensitive goods, who time and again face losses due to enforced glitches in the system.

Coming to proposals relating to exemption notifications, it has been proposed that notifications that grant conditional exemptions (not general exemptions) will have a set sunset period of two years from the date of notification. This will go a long way in culling exemption notifications which either lose their relevance or become outdated for whatever reason.

In case renewal of an exemption is required, the trade would automatically be alert and can represent their case to the government pre-emptively and proactively to extend the time limit of an exemption notification. This would also help in facilitating a participatory approach within the trade and industry. Existing notifications, however, have been allowed to continue till March 31, 2023.

Overall, on the customs front, this has been an interesting Budget, one which shows that considerable thought has been put into evolving the customs regime into a future-proof, interactive and self-reliant regime. However, there is always the need for more improvement, especially in introducing trade-facilitation measures, which will further strengthen this call of ease of doing business and support the industry.

Bose is partner and Chakrabarti is consultant, Shardul Amarchand Mangaldas & Co

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