The government is mulling a prepaid tax and customs model for cross-border transactions, which is likely to push the price of purchases made on foreign e-commerce websites by nearly 50 percent.
In a bid to put a check on foreign e-commerce players dodging payment of taxes, the government is mulling a prepaid tax and customs model for cross-border transactions, The Economic Times reported.
This move, if it goes through, is set to push up the price of purchases made via foreign e-commerce websites by nearly 50 percent, the report noted.
So under this model, any foreign e-commerce company would be able to have its goods delivered to Indian customers overseas only after paying taxes and customs duty through a government operated IT system.
The plan comes after last year's crackdown by the Centre on Chinese e-commerce platforms that were found to be evading customs duty and GST payments. Import of goods through the Mumbai port were halted at the time, as per another ET report, with the government looking to implement similar curbs at other ports like Kolkata and Chennai.
As per sources quoted in the report, several Chinese e-commerce platforms were exploiting the "gift route" to ship goods ordered by Indian custmers, thereby dodging legitimate taxes. Gifts of up to Rs 5,000 received by Indians are, as per the law, are not subject to any taxes. This customs exemption was reportedly being misused by platforms like Club Factory, AliExpress and Shein.However, as per a notification in December 2019, the Directorate General of Foreign Trade (DGFT) revoked this tax exemption clause for goods purchased through foreign e-commerce portals, except in case of life-saving drugs and rakhis.
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