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Cease the import of goods as “gifts and samples’ and prevent misuse by Chinese e-commerce vendors

December 3, 2019

By Vikram Narula and Rupin Chopra
The government is exploring to introduce suitable amendments in the present applicable rules for omitting the provisions basis which citizens can receive duty-free ‘gifts and samples’ from overseas which are valued at below Rs. 5,000/-. This move is post observing the widespread exploitation of this provisions by the Chinese e-commerce vendors.

The Central Board of Indirect Taxes and Customs (“CBITC”) which is responsible for regulating the levy and collection of custom duty was initially imposing a cap on the quantum of gifts that an individual may receive, but has eventually dropped the proposal owing to the complexity in executing the same.

The customs department commenced the imposing of restrictions on e-commerce imports camouflaged as ‘gifts’ in November last year. Additionally, an approach to block the clearance of such packages across all ports was adopted which led to a significant fall in the number of gifts entering the country. Reports suggest that all three major cargo ports in the cities of Mumbai, Delhi and Bengaluru constitute 90% of imports have obstructed the clearance of gifts. The reports suggest that the import of gifts have been restrained entirely. Reports also suggest that a policy is being proposed wherein the word ‘gift’ is omitted. The policy may impose restriction on the import of goods as gifts. Accordingly, goods imported as gifts may not be permissible and will be subject to custom duty prior to them being cleared.

This initiative by the CBIC to cease imports as gifts has been largely controlled, however it has been observed that another mechanism for imports has surfaced. There are firms which are found to be acting in the capacity of an ‘intermediary’ between customers and Chinese ecommerce firms which dodge the payment of higher duties leviable on personal imports. The Mumbai custom port this year had seized sizeable packages of reasonably well known firms which acted in the capacity of an importers (on record) for Chinese firms.

Reports suggest that CBIC has been keenly pursuing feedback from the industry on ways to curb duty and GST evasion by ecommerce vendors which are located outside the country. Presently, CBIC has been actively working with the Department for Promotion of Industry and Internal Trade (“DPIIT”) by providing inputs for DPIIT’s e-commerce policy. One of the salient features of the draft policy is to make registration mandatory for all e-commerce entities to be registered in India for the objective of monitoring their sales.

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