Key Select Issues:

Indirect Tax Considerations

01 02
RoDTEP Scheme GST Implications
– Significance on Director’s
and steps Remuneration
involved

03 04
Transitional FTA/PTA –
Credits under Significance &
GST practical
nuances MAY 27, 2020
1
1 RoDTEP

2
 REMISSION OF DUTIES AND TAXES ON EXPORT PRODUCT ...

01 DISPUTE
• India’s export incentive schemes challenged by US for violation of WTO norms
• Incentive schemes were to cease upon crossing per capital income of USD 1000 for
consecutive three years – Which allegedly crossed by India in 2017

02
• MEIS
• EPCG, Advance Authorization, Drawback
AFFECTED SCHEMES
• Benefits allowed to EOU, EHTP, BTP

03
• Replacing existing export incentive schemes with new WTO compliant
WAY FORWARD scheme viz. Remission of Duties and Taxes on Export Product – ‘RoDTEP’

NATURE OF RoDTEP - Refund of all un-rebated/non-creditable central and state levies and taxes

04
3
...REMISSION OF DUTIES AND TAXES ON EXPORT PRODUCT ...
BENEFIT TO COMPRISE OF FOLLOWING COMPONENTS

Non Creditable taxes under Section 17(5)

01

Electricity duty Stamp duty

07 02

Central excise duty on fuel State VAT on fuel

06 03

05 04 Royalty paid to government authorities

Mandi Tax

4
...REMISSION OF DUTIES AND TAXES ON EXPORT PRODUCT ...

 To replace the existing MEIS scheme  Export would be entitled for

 Scheme would be compliant with Background Benefit transferrable scrips which can be
WTO norms used for duty payments
 To allow reimbursement of all  Scrips rate would be decided based
embedded duties on export inputs on the products
and indirect taxes
Current Status

• DGFT is functioning as Sectoral RoDTEP Committees

(SRCs) and accordingly collecting the data with
respect to un-rebated taxes/duties/levies used in the
manufacture of exported products form industry
associations
5
 ...REMISSION OF DUTIES AND TAXES ON EXPORT PRODUCT...
Trade Notice No. 03/2020-21 dated April 15, 2020

01 02 03 04

Benefits under MEIS for any
item/tariff line /HS Code currently
listed in Appendix 3B, Table 2 (MEIS
Schedule) will be available only up to
31.12.2020
Availability prior to 31.12.2020, until
item/tariff line/HS code is notified to
be covered under RoDTEP
It would then be simultaneously
removed from coverage under
MEIS
Detailed operational framework
will be notified separately
RoDTEP in consultation with
Department of Revenue, Ministry
of Finance

Note: it would now appear that the MEIS benefits would continue on exports made even after 01.04.2020 till 31.12.2020. However prior to the
said end date if certain item/tariff line/HS code gets notified under the new RoDTEP scheme it would naturally get excluded from the MEIS
6
...REMISSION OF DUTIES AND TAXES ON EXPORT PRODUCT

STEPS INVOLVED

BEST RATE ENHANCEMENT

OF DBK RATE
Approaching authorities in
time to affix the best rate INCLUSION OF SION NORMS Involves analysis of un-
under new scheme rebated levies to support
SERVICES the claim

Involves analysis of all un- Filing representations Filing representation for

rebated levies and making a
report to corroborate the
claim
affixing SION NORM, Rational DBK rate would
for making the scheme
lead to appropriate rate
applicable for Services
under RoDTEP
export

7
2 GST ON DIRECTOR’S
REMUNERATION

8
 GST ON DIRECTOR’S REMUNERATION…
HISTORY IN BRIEF

CIRCULAR
31.07.2009 W.E.F. JULY 2017

PRE-JULY 2012 Levy of GST on

Clarification: ‘Supply of
Remuneration paid to Service’
Director, not leviable to W.E.F. JULY 2012
Service Tax being Prior to Negative
Employment
list regime - No Tax
carved out of the
on Director’s
Negative list levy
remuneration
regime levies
Service Tax on
Directors services

GST ON
DIRECTOR’S
REMUNERATION ?

9
 GST ON DIRECTOR’S REMUNERATION

NATURE OF DIRECTOR’S ROLE AND DIFFERENCE IN APPLICABILITY OF GST LAW

Non-Executive SECTION 7 Executive SCHEDULE - III

Director Director
- Qualifies as a - Employer-
taxable supply employee
Miscellaneous Full time relationship
- Remuneration employment
services
liable for levy of - Not to be treated
GST as Supply
Fees as - Also a related Salary as - No GST liability
remuneration party transaction remuneration

10
 …GST ON DIRECTOR’S REMUNERATION…

CONTRADICTORY RULINGS

CLAY CRAFT INDIA PRIVATE LIMITED ANIL KUMAR AGARWAL

AAR NO. RAJ/AAR/2019-20/33 AAR NO. KAR/ADRG/30/2020

 Authorities have ruled that director’s
remuneration is leviable to GST without
scrutinising the distinction in nature of
duties performed by them;
 Executive and Non-executive director’s
remuneration is under the scanner
despite clear provisions of Schedule III;
 Authorities analysed two possible roles
of Director i.e. ‘Employee’ vis-a-vis
‘Service provider’
 Noted that role of Director can be
established based on appointment letter,
, details of ESI, PF deductions, etc.
 Activities of Director as an ‘Employee’
are not to be treated as ‘Supply’

 Whether covered as part of employment ? – Will be determined based on terms of employment;

Director’s sitting fees ?  In absence of specific clauses, it would be tretaed beyond employment and attracts GST liability !
11
…GST ON DIRECTOR’S REMUNERATION…

KEY TAKE AWAY

Director’s remuneration being caught between divergent views of authorities

01
It must be clearly borne that entire dispute resolves around relationship of Director with
02 the company

03
While employer-employee relationship is kept out of GST net, functions in the capacity
of service provider is covered under the scope of supply
04

GST is thus dependent on how well a Director’s roles and responsibility as well as form of
remuneration are covered in the contractual document –
Be it Employment Agreement or Service Agreement ! 12
 …GST ON DIRECTOR’S REMUNERATION…

WAY FORWARD

Analyze the Nature and

Functions performed by
Director

Reword/restructure the
GST
scope of Director’s
functions in the
COMPLIANT
Appointment letter

Discharge Appropriate
GST liability under
reverse charge

13
Distinction between Executive and Non-Executive Director
Particulars Executive Director
Roles and Responsibilities Responsible for Management and
Administration of company
Have executive powers delegated from
shareholders
Intimate knowledge of the working of the
company
Whole time Executive director have either full time
employment/engagement employment or full time service contract
MD – Must be an executive director
Remuneration Executive director generally gets
remuneration for executive duties
Non-Executive Director
Non-executive directors are
independent of management on all
issues including strategy, performance,
standards of conduct and evaluation of
Performance
Provides objective judgment
Non-executive director do not have any
full time engagement with company,
though they may have a part time
service arrangement
Non executive director generally gets
sitting fee for board meetings except in
some cases where they get
remuneration for their part time
responsibilities
14
3 LIMITATION ON TRANSITIONAL
CREDITS

15
 LIMITATION ON TRANSITIONAL CREDITS…
SECTION 140
Registered person could carry forward the Tax
Credits of erstwhile regime into GST regime
No refund mechanism provided for the erstwhile
credits while transitioning into GST regime
TRANSITIONAL
PROVISIONS
Carry forward was to be in the ‘manner to be
prescribed’ which were notified by Central
government vide CGST Rules
RULE 117
Provides for the mechanism to carry forward
credit by furnishing GST TRAN 1 within 90 days
from appointed day
Multiple extensions were granted thereafter
Limitation of time (irrespective of extensions
provided) is challenged before various High Courts
as being Ultra Vires the constitution
During the relevant time, Section 140 did not
provide express power to impose time limitation
16
 …LIMITATION ON TRANSITIONAL CREDITS…

A CENVAT Credit is an accrued and

vested property DELHI HIGH COURT
CENVAT is a constitutional right &
B under Article 300A ALLAHABAD HIGH
Extension of the timeline allowed COURT
C for filing Form TRAN-1 owing
- Blue Bird Pure Pvt. Limited
- SARE Realty Projects Pvt. Limited
‘technical difficulty’ in GST portal -Bhargava Motors
- Continental India Pvt. Ltd

D Right to carry forward saved by

Sec. 174 (2)(c) – Savings provision
BOMBAY HIGH CENVAT Credit as merely a
COURT concession A
&
Rule 117 is not ultra vires the
GUJARAT HIGH
COURT
provisions contained in Section 140
of CGST Act
B
- JCB India Ltd
SUPREME Previously y held that tax credit is indefeasible
and vested right
- Nelco Limited
- Willowood Chemicals Ltd
COURT - Eicher Motors; Dai Ichi Karkaris

HIGH Decisions of Delhi and Allahabad High Court are

in line with Supreme Court
17
COURT
 …LIMITATION ON TRANSITIONAL CREDITS…

DELHI HIGH COURT : BRAND EQUITY TREATIES LIMITED.

01 Time period prescribed for filing Form GSTR TRAN-1 has no rationale
-90 days limitation has no rationale – ‘it is only directory and not mandatory’
-Absence of refund mechanism meant that carry forward of credit is the only way to preserve the right to credit

“Technical difficulties” cannot be restricted to technical glitches in GSTN portal

02 -Different yardsticks to evaluate difficulties faced by taxpayer and that of Government , is arbitrary
-Narrow interpretation of ‘Technical difficulty’ is contrary to the statutory mechanism in the law

CENVAT credit balances as per “erstwhile returns” is taxpayers’ property

03 -CENVAT Credit accrued and vested is the property of tax payer
-Such right to credit is a constitutional right under Article 300A and delegated legislation cannot take it away by framing rules

Limitation Act, 1963 to apply to time limit for filing Form GST TRAN-1
04 -CGST Act does not restrict credit by limitation of time
-In absence of specific provision, residuary limitation of 3 years under Limitation Act, 1963 could be referred

Form GST TRAN-1 can be filed before 30 June 2020 by similarly placed taxpayers
05 - If GST TRAN 1 is filed prior to 30 .06.2020, credit must be allowed. Authorities to open the portal or accept form manually
- Other taxpayers in similar situation also to be allowed the benefit
- Wide publicity of this judgment to be made

18
 …LIMITATION ON TRANSITIONAL CREDITS…
To surprise of every stake holder, and in
contradiction with the norms High Court
borrows limitation from the Limitation
Act, 1963

Assesses need to avail the balance

Latest in the catena, Delhi High Court yet Credits, if any, within revised time limit
again provides relief to the Petitioner which is by now a bare minimum of 35

TAKE days.

AWAY

One must remain vigilant, if relaxations

Validity survives amendment to Section 140. provided by CBIC for various measures are also
Although it takes away a prospective made applicable to such limitation borrowed
argument that limitation under 117 is without from Limitation Act
any authority bestowed by Section 140.

19
 LIMITATION ON TRANSITIONAL CREDITS…
Little time at hand to avail the benefit of
extended limitation

A positive development in providing relief to avail Lockdown may cause practical difficulties to
transitional credits CONS avail the benefit of extended limitation

Decision is in consonance with Supreme Court’s

earlier decision of ‘credit is vested and indefeasible Reference to Limitation Act, 1963 may
right’ – Eicher Motors, Dai Ichi Karkaria find itself in the teeth of Supreme Courts
earlier decision - in a self contained
statutory code, no reference could be
A judicious, balanced and well reasoned PROS made to general provisions’ - Hotel and
jurisprudence Restaurant Asso.

Reference to the Limitation Act, 1963 is more

likely to turn out weakest link in the chain.

Presently an SLP is filed by the Revenue before Supreme Court against the Delhi High Court’s decision.
It will be worthwhile to see how Supreme Court would, if it did, secure the right to transitional credits and addresses issue of limitation.
20
4 FREE / PREFERENTIAL TARDE
AGREEMENTS

21
 AN OVERVIEW : TRADE AGREEMENTS

Meaning Genesis Types

Trade Agreement or Trade bloc is an - Enhanced Trade Co-operations Depends on

arrangement between two or more - Avoid mis-understandings - No. of participating country
countries to either enhance or restrict - Mutual benefits and punitive - Level of economic integration
the international trade with actions on breach of contract - Special Engagements
underlaying terms and conditions

22
 NATURE AND CATEGORIES OF TRADE AGREEMENTS
Signatories
Uni-lateral Agreements
Its not an agreement. It’s a one-sided
directions to extend or curb the benefits on
specific country
Bi-lateral Agreements
Agreement involving two countries. Lower
Tariffs or confer prefer trade status on each
other. E.g. Indo-Sri-Lanka, Indo-Nepal
Multi-lateral Agreements
Involving Two or more countries or countries
in a continent. Difficult to negotiate, but very
powerful once finalized.
E.g.: ASEAN, APTA
Economic Integration Special Agreements
Preferential Trade Agreements
Agreements interested at WTO or OECD
Two or more countries agree to reduce the tariff
Framework which applied to all the
on specified products, namely the positive list.
members of such Trade associations
E.g.: India MERCOSUR
Free Trade Agreements
Tariffs / Duties on items covering substantial
bilateral trade between the countries are
eliminated. E.g.: Indo-Sri-Lanka FTA
CECA / CEPA
Integrated package on goods, services and
investment along with other areas including IPR,
competition etc. E.g.: Indo-Korea CEPA
Customs / Economic Union
Common Market extended though further
harmonization of fiscal and economic policies 23
 MAJOR EXISTING AND PROPOSED TRADE AGREEMENTS
SAPTA
Agreement on SAARC Preferential
Trading Arrangement
Existing Under Negotiations IGCC
SAFTA India-Gulf Cooperation Council (GCC)
South Asia Free Trade Area

ASEAN IT-CECA
Association of South East Asian India-Thailand Comprehensive Economic
Nations Cooperation Agreement (CECA)

IFTA
India African Trade Agreements IS-FTA
India - Israel Free Trade Agreement
IJ CEPA
India Japan CEPA
IA-CECA
SATIS India-Australia Comprehensive Economic
SAARC Agreement on Trade in Services Cooperation Agreement (CECA)

ECIF
Economic Cooperation between India and Finland
24
 RULES OF ORIGIN : RELEVANCE AND SIGNIFICANCE

Rules of origin are used: Rules of Origin are used

3 4
- Implementation of commercial - for the purpose of trade statistics
- To determine MFN treatment or - for the application of labelling/marking requirements
preferential treatment - for Government procurement

Uses Uses

2 5
Duties and restrictions in Common criteria used are:
several cases depend upon the - change in tariff classification
source of imports Importance Criteria - regional value addition
- substantial manufacturing

Rules to determine origin of a

product for the purposes of
international trade.
1 Meaning
Proof of
Origin
6 These are enforced through a certificate
of origin that is issued by authorised
agencies of the trading partner25
RULES OF ORIGIN : IN INDIAN CONTEXT

Authority to Issue the COO

For all major Trade Agreements, COO is issued by the Export Inspection
Council (EIC). However, for exports from SEZ, COO can be issued by
Development Commissioners of EPZ, SEZ or FIEO

Chapter VAA Section 28DA

New schemes casting obligations by making self declaration, maintaining
appropriate documents and exercise reasonable care which would go beyond
mere production of COE.

Confiscation and Proceedings

The Custom Authorities can confiscate the goods in case of contravention of
the provision of this chapter, and to delegate the power to prescribe rules in
relation to the specified timelines, circumstances, etc. for the administration of
ROO under the Trade agreement to the Government.

26
 BENEFITS OF TRADE AGREEMENT : TO THE COUNTRY

Incremental Exports Due to Trade

120
Agreements Increase in Economic Growth / Exports of a country
The Trade Agreements have immensely contributed in growth of
Exports with the respective participating countries.
100 97

Foreign Direct Investments

80
Increase in Exports has a direct impact on increase in FDI between the
participating country
60
Lower Government Spending
43

All the subsidies to support the local industries, now can be

40
28.5

used for straightening other areas in the country

21.5

20 27 Expertise and Technology Transfer

12
6.8

Often, global companies have more expertise and

4.2

technological knowledge in an industry than the domestic

0
SAFTA ASEAN CECA Indo-Korea CEPA Indo-Japan CEPA companies, leading to beneficial economic integration
2010-11 2018-19

27
 BENEFITS OF TRADE AGREEMENT : TO IMPORTERS AND EXPORTERS

REDUCTION IN TARIFF CONCESSION / RISK DIVERSIFICATION

A By elimination of Tariffs and some Non-Tariff Barriers, importers and exporters from
participating country gets easy access to the market

COMMERCIAL ADVANTAGE TO EXPORTERS AND IMPORTERS

B Exporters get preferential treatment over non-FTA member country competitors
resulting in huge difference in the product pricing. E.g. in the case of ASEAN Trade
Agreement, an Indian exporter of Leather shoes or material will have potential 20%
advantage over non-FTA exporter such as Canada.

PROTECTION TO LOCAL EXPORTERS

C FTAs may also protect local exporters from losing out to foreign companies that
might receive preferential treatment under other FTAs

STRATEGIC INVESTMENTS
D Strategic investments in countries having large domestic market of a product vis-à-vis
FTA agreement with the other source country

E ADVANTAGE OF NON-TARIFF BARRIERS

Advantages of a Trade Agreement is not limited only to Tariff reduction, but it may
extend to relaxation in various non-tariff barriers as well, such as
- Customs Procedures
- Import licencing procedures
- Trade documentation 28
- Pre-shipment inspections
INDIA ASEAN TRADE AGREEMENT : BENEFITS TO IMPORTER/EXPORTERS

Participating Countries and Concessions and Benefits to Exclusion List

Period of benefit
It includes Brunei Darussalam,
Cambodia, Indonesia, Lao PDR,
Malaysia, Myanmar, Philippines,
Singapore, Thailand and Vietnam.
The treaty was signed on varying
dated in 2009 and 2010
the Importers and Exporters India has excluded 489 products and
Tariff concessions are provided to : 590 products from the list of Tariff
- Eliminate for Normal Track products concessions and and Tariff
- Reduce for Sensitive Track elimination respectively pertaining
- Reduce to certain pre-determined to agriculture, textiles, auto,
levels for Highly Sensitive Track or fisheries, petroleum products,
special products chemicals etc.

Rules of Origin Safeguard Measures Export Opportunities for India

For Imports: Participating countries may take Indonesia: Marine products, Fruits,
- Tariff Classification Change
safeguard measures to protect the Vegetables, Cereals, Textile,
- Min. value addition of 35%
domestic industry from sudden surge of Machinery and Pharmaceuticals etc
- Substantial manufacturing imports due to tariff concessions. The
process same may extend up-to a period of 5 Malaysia: Petroleum Products,
years organic chemicals, clothing,
For Exports footwear, machinery etc.
- Certificate must be issued to
effect that the product Thailand: Processed food, footwear,
originates from India machinery, automotive products29
 INDIA ASEAN TRADE AGREEMENT : BENEFITS TO IMPORTER/EXPORTERS

Major Products Existing Tariff Tariff 7.05Reduction Tariff Elimination Gradual Reduction

Automobile - 87011000 10% NA 0% NA

Automobile - 86040000 10% NA 0% NA

Chemical - 29051100 10% 5% NA NA

Pharmaceutical - 30051010 10% NA 0% NA

Pharmaceutical - 33061010 20% 5% NA NA

Plastics - 39041010 10% 5% NA NA

Machinery - 84511010 7.50% NA 0% NA

Medical – 90184900 10% NA 0% NA
Medical – 90212900 10% NA 0% NA
Plastics – 32061190 10% NA 0% NA
Iron & Steel72193390 7.5% NA 0% NA

30
INDIA JAPAN CEPA AGREEMENT - BENEFITS TO IMPORTER/EXPORTERS

Participating Countries and Concessions and Benefits to Exclusion List

Period of benefit
Bilateral agreement with Japan
effective from August 2011 to 2026
the Importers and Exporters
• Products in A category have 0% duty
• Products in B10, B15 & B17 category
are reduced from base rate to 0%
duty in 11, 16 & 8 equal annual
installments respectively
The negative list includes –
Marine products, Dairy products, Fruits,
vegetables, spices and nuts Cereals, Vegetable
oils, Processed agricultural products, Organic
chemicals, Plastics, rubber and paper, Leather,
Mechanical and Automotive products

Rules of Origin
For Imports: Safeguard Measures Service Sector Benefits
- Complete manufacturing / - Suspend further reduction of any rate Broadly 12 sectors and more than 100 sub-
processing in origin country of customs duty on goods covered sectors have been included in the agreement.
OR under this Agreement; or The sectoral commitments of the agreement
- Tariff Classification Change at - Increase the rate of customs duty on covers Business Services, Communication,
six-digit level the good to a level not to exceed the Construction and related engineering
- Min. value addition of 35% lesser of MFN Rate: services, Distribution (Excluding animals),
• on the goods in effect at the time Education, Environment, Health Related,
For Exports the measure is taken; and Tourism and Travel-Related Services,
- Certificate must be issued to • on the goods in effect on the day Recreational, cultural and sporting,
effect that the product immediately preceding the date of Transportation Services and Other Services.
31
originates from India entry into force of this Agreement.
INDIA JAPAN CEPA AGREEMENT - BENEFITS TO IMPORTER/EXPORTERS

Major Products Existing Tariff Tariff Reduction Tariff Elimination

Chemical - 28030010 10% 0.7% NA

Plastics - 39049010 10% 0.7% NA

Clothing - 52081110 10% NA 0%

Iron and steel - 72085310 15% NA 0%

Railway - 86071100 10% 0.9% NA

Nuclear Reactors - 84059000 7.50% 0.7% NA

32
INDIA KOREA CEPA AGREEMENT - BENEFITS TO IMPORTER/EXPORTERS

Participating Countries and Concessions and Benefits to Exclusion List

Period of benefit the Importers and Exporters
It is a bi-lateral agreement between • Products in E-0 category have 0% duty
India and Korea. The treaty was • Products in E-5 & E-8 category are reduced
signed on 1st January 2010 and from base rate to 0% duty in 5 & 8 equal
benefit extends till 2019 annual installments respectively
• Products in Sensitive category shall be
reduced to 50% of base rate in 10 equal
annual installments
Rules of Origin Safeguard Measures
For Imports: Suspend further reduction of any rate of customs
- Tariff Classification Change duty on the good provided for under this
- Min. value addition of 35% Agreement; or
- Substantial manufacturing (b) increase the rate of customs duty on the good
process to a level not to exceed the lesser of:
(i) the MFN applied rate of customs duty on the
For Exports good in effect at the time the measure is taken;
- Certificate must be issued to and
effect that the product (ii) the MFN applied rate of customs duty on the
originates from India good in effect on the day immediately preceding
Following are the important products in
the negative list –
Poultry, Dairy products, Fruits &
Vegetables, Cereals, Vegetables oils,
Petroleum products & organic chemicals,
textiles & clothing, plastics, rubber &
paper, automotive & mechanical &
electrical machinery
Export Opportunities for India
Korea has undertaken immediate tariff
liberalisation on product categories of
India’s export interest which includes
marine products (prawns, shrimps and
lobsters), textiles, chemical and
chemical products, vegetables, fruits,
meat and meat products, spices, castor
and rapeseed oil, tobacco and mineral
stones.
33
INDIA SINGAPORE CECA AGREEMENT - BENEFITS TO IMPORTER/EXPORTERS

Participating Countries and Concessions and Benefits to Exclusion List

Period of benefit the Importers and Exporters Categories of fruits and vegetables, spices,
It is a bi-lateral agreement between plantation crops, vegetable fats and oils,
• Early Harvest, Phased Duty
India and Singapore. The treaty was processed foods,
Elimination and Phased Duty
effective from 1st August 2005. mineral products, plastics and rubber,
Reduction.
2006 – 16.6 Bn, 2017 – 25.2 Bn textiles and clothing, stones, glass and
ceramics, base metals, automotives and
miscellaneous manufactured articles.

Rules of Origin Safeguard Measures Export Opportunities for India

- Fixed level of minimum value
- Suspend further reduction of any Singapore has undertaken immediate tariff
addition from the originating
rate of customs duty on goods liberalization on number of products of
country to be at 40% of the FOB
covered under this Agreement; or India’s export interest. These are mostly
- Change of tariff heading (CTH) at the
- Increase the rate of customs duty on food products. Majorly include beverages,
4-6 digit level as per WTO’s
the good to a level not to exceed the dairy, meat, marine products, vegetables &
Harmonized System code
lesser of MFN Rate: Cocoa.
- Specifications of the kind of value
addition (i) on the goods in effect at the time
- Certificate of origin must be issued the measure is taken; and
to effect that the product originates (ii) on the goods in effect on the day
from India or Singapore immediately preceding the date of
entry into force of this Agreement. 34
INDIA CHILE TRADE AGREEMENT - BENEFITS TO IMPORTER/EXPORTERS
Participating Countries and
Period of benefit
The existing India–Chile PTA, signed on
8th March, 2006 which came into force
in September, 2007, has been expand
ed and implemented by both sides on
16th May, 2017
Rules of Origin
For Imports:
- Tariff Classification Change
- Min. value addition of 40%
- Substantial manufacturing process
For Exports
- Certificate must be issued to effect
that the product originates from
India
Concessions and Benefits to
the Importers and Exporters
- Six tariff concessions ranging from 10% to
50% on 178 tariff lines
- Meat and fish, rock salt, Iodine, Copper
ores and concentrates, Chemicals, Leather
products Newsprint & paper, wood &
plywood articles, industrial products & oils
Safeguard Measures
The applicant country must justify the import
quota for the product concerned under the
agreed preference established in this
Agreement. The import quota shall not be less
than the average imports of the product
concerned in the twelve (12) month period
preceding to the period for which serious
injury was determined.
Exclusion List
- Six tariff concessions ranging from
10% to 100% on 296 tariff lines
- Inorganic chemicals, footwear,
pharmaceuticals, plastic and rubber
articles, textiles, apparel, articles of
iron/steel & copper, dyes and resins
Export Opportunities for India
Major export products from India
includes agricultural products, organic
& inorganic chemicals, footwear,
pharmaceuticals, plastic & rubber
articles, textiles, apparel, articles of
iron/steel & copper, dyes and resins and
industrial products
35
INDIA MERCOSUR AGREEMENT - BENEFITS TO IMPORTER/EXPORTERS

Participating Countries and Concessions and Benefits to the Exclusion List

Period of benefit Importers and Exporters
Preferential Duty benefit has been offered on The Mercosur has offered margin of
MERCOSUR is a trading bloc which preference ranging from 10% to 100% on
450 products with concession ranging from
has six member viz. Brazil, 452 tariff lines and it includes Food
10% to 20% and it includes various products
Argentina, Uruguay, Paraguay, preparations, organic chemicals,
such as meat products, chemicals, dyes &
Venezuela and Bolivia. India- pharmaceuticals, essential oils, plastics &
pigments, raw hides and skins, leather articles,
MERCOSUR PTA was signed and articles, rubber products, tools and
wool, cotton yarn, glass and glassware, iron
effective from FT 2009. Extension implements, electrical machinery &
and steel, electrical machinery and
under negations. equipments
equipments, optical, photographic and
cinematographic apparatus
Rules of Origin Safeguard Measures Export Opportunities for India
For Imports: The Party that applies a preferential MERCOSUR has undertaken immediate
- Tariff Classification Change safeguard measure should establish an tariff liberalization on product categories
- Min. value addition of 60% import quota for the product concerned of India’s export interest which includes
- Substantial manufacturing Food preparations, organic chemicals,
under the agreed preference established in
pharmaceuticals, essential oils, plastics &
process this Agreement. The import quota shall not
articles, rubber and products, tools and
be less than the average imports of the implements, electrical machinery &
For Exports product concerned in the thirty-six (36) equipments
- Certificate must be issued to month period preceding to the period for
36
effect that the product originates which serious injury was determined.
 TRADE AGREEMENTS : PRACTICAL CHALLENGES
Trade Agreements vs India
No substantial gain Effect Due to
for India COVID-19
- India had to make larger tariff
- Owing to present lockdown due to
reduction as compared to the FTA COVID-19 Japan has asked Indian
partner Government to make labour laws
- Traditionally, TA have favored to less stringent and improve logistics
countries with excess production and lower customs duties on
specific products.
capacity
- Permanent tariff concessions on
- Non-Tariff barriers and lack of
health and farm products at the
transparency in Origin Rules have led World Trade Organization as an
to fraudulent claims answer to Covid-19 trade
- Rise in protectionism leading to self- disruptions
reliant policy
- Increase in Trade Deficit
Others
- Alleged dumping some fiber
products from Vietnam, probe
initiated to impose safeguard
measures
- India’s trade deficit with Korea
from US$ 5 billion in 2009-10 to
US$ 12 billion 2018-19 and a
sizable increase in the share of
Korea in India’s overall trade
deficit from 4.7% to 6.5% during
the same period.
37
TRADE AGREEMENTS : WAY-FORWARD

C
A TRADE
FTA/PTA
COMPLIANCES
Ensure that relevant
TRADE
ANALYSIS
Thorough analysis of compliances and AGREEMENTS AND
supply chain from documentation
FTA/PTA perspective Trade AgreementsFUTURE
are certainly going to attain more
B significance on the face of a liberalization in
GOVT. international trade and opening of overseas market
ADVOCACY with a free trade policy. Therefore, identifying and
Representation to
MoC for specific availing the legitimate benefit under the Trade
product inclusion or Agreements is not a choice but indeed a necessity
new agreements
39
40