According to Economic Times, The Department of Commerce (DoC) has asked the Finance Ministry to impose a border adjustment tax (BAT) on imports to offset the impact of levies – electricity duty, clean energy cess, fuel and royalty.
As per a Report by CNBC, the government is considering to impose additional customs duties on imported goods through a Border Adjustment Tax (BAT). It’s a duty that is proposed to be imposed on imported goods in addition to the customs levy that gets charged at the port of entry.
The Border Adjustment Tax is proposed to be a non-creditable levy on imported goods. The idea is to bring similar goods in the imported and domestic baskets at par.
What is Border Adjustment Tax?
In a nutshell, a border adjustment tax means that a tax is levied on imports (goods made overseas but sold in India) and exports are not taxed (goods made in India but sold elsewhere).
The rationale behind a border adjustment is that, under the current corporate tax system, India-based exports implicitly bear the costs of taxation, while, on the other hand, imports do not. Consequently, this results in a de facto penalty on exports while subsidizing imports.
The Indian industry has been complaining to the government about domestic taxes like electricity duty, duties on fuel, clean energy cess, mandi tax, royalties, biodiversity fees that get charged on domestically produced goods as these duties get embedded into the product. But many imported goods do not get loaded with such levies in their respective country of origin and this gives such products price advantage in the Indian market.
The ministry has proposed to amend the section 3 of the Customs Act to impose Border Adjustment Tax. It is most probably to be announced in this year Budget.
