Shopping abroad? Reducing customs duties fuels the import drive – The Times of India

Shopping abroad will cost you less from April as the amount of tax you pay on foreign goods for transport to India decreases. The budget proposed reducing the customs tariff rate (basic customs duties) on all goods subject to customs duties imported for personal use from 20% to 10%.The change, once implemented, will apply to online purchases as well, said Meyyappan Nagappan, partner in tax and impact finance at Trilegal. “The reduction in customs should also reduce the integrated GST levied on imported goods. Many e-commerce sites sell to Indian customers without taking any responsibility for customs, GST or import operations in India. This would lower the cost of such transactions for consumers,” Nagappan said.

When a foreign good is purchased online, consumers typically use the services of a customs agent to clear it through customs and pay duties. Import duties are imposed above a certain threshold (in terms of product value) which varies depending on the product.

At a time when a weaker rupee is making imported goods more expensive, the move is somewhat expected to soften the blow on consumers, making the products more affordable.

iPhones, electronic gadgets, designer and luxury bags and shoes are among the most popular items that Indians tend to splurge on when shopping abroad. Rising disposable income allows more middle-class families to spend on travel and shopping abroad, both offline and online.

Many of them are also turning to luxury consumption of perfumes and fashion accessories. A report published by a major business association in the country last year showed that Indian tourists, for example, are among the biggest spenders on luxury goods in Singapore.

Personal imports of items like electronics and accessories will now become more affordable, says Sohrab Bararia, partner at Grant Thornton Bharat.“This measure aligns customs provisions with inflation and evolving travel patterns while alleviating the cost of personal imports,” said Vimal Pruthi, tax partner at EY India. Experts said that easing tariffs would also limit informal channels and encourage compliance with formal customs procedures.Aayush Mehrotra, partner at Khaitan & Co., added: “Imports under this category for personal use are typically high in volume but have low returns from a revenue and litigation perspective. As such, the lower duty rate is likely to improve compliance and reduce friction in assessment disputes and discretionary assessments at the passenger interface. At a macro level, this change is consistent with the goal of reducing the financial burden on households.”