In July, in order to stop e-commerce shipments from Southeast Asia and China which were wrongly declared as ‘gifts’ to evade duties, the courier terminals at Bengaluru and Delhi stopped clearing parcels under the CB-12 (gifts and samples) route.
Mumbai Customs took similar action in January 2019. The Mumbai Customs department clamped down on gift imports since it found that many foreign sellers were evading customs duty by categorizing their products as gifts.
Sachin Taparia, founder, chairman and CEO of LocalCircles wrote in a letter to the CBIC, that However, industry players say that these gift imports are still continuing in large numbers at other ports of entry.
Gifts are still entering India through other ports like Kolkata, Kochi, Chennai, Hyderabad, etc, and through the Indian postal channel.
“Also, the postal channel is not proactive about engaging Customs officials when gift shipments arrive.”
According to the Foreign Trade Act, CB-12 rule, individuals can receive free samples and gifts up to Rs 5,000 in value without paying any duties. There is also no cap on the number of gifts that an individual can receive.
It was brought to the notice of the Customs Department by Domestic industry players that several e-commerce companies, (especially China) were delivering orders to their India-resident customers by disguising their products as gifts to evade the Customs duty that would normally be applicable on the products.
To tackle the evasion of Custom duty by foreign sellers, the Central Board of Indirect Tax and Customs (CBIC) has asked domestic industry players to share a detailed and long-term solution to exploit a loophole in the law.
Hence, CBIC has now asked the domestic industry to come up with a detailed plan by the end of the month to plug these loopholes.
One of the solutions being suggested is the imposition of a flat rate of tax and Integrated Goods and Services Tax to be applied on all items imported from e-commerce companies. This way, gifts can be distinguished from e-commerce purchases.
Another approach being favored is to integrate the payment portals of the e-commerce companies with the CBIC so that when a payment is made for a product that has to enter India, the CBIC has the barcode and other details it can match with the product when it physically arrives at a port of entry.