During the period under review, India continued to streamline customs procedures and implement trade facilitation measures. An electronic system for customs clearance has been introduced, and a risk management system is also in place to selectively screen high and medium risk cargo for customs examination. Despite these measures, India's import regime remains complex, especially its licensing and permit system, and its tariff structure, which has multiple exemptions that vary according to product, user, or specific export promotion programme.
India's tariff is announced in the annual Budget but individual tariff rates may be changed during the year. In addition to the standard tariff rate, importers are required to pay an additional duty ("countervailing duty") and a special additional duty instead of local taxes. To determine the "effective" applied tariff rate (i.e. basic duties and other customs duty) on a particular product, separate customs and excise tax schedules must be consulted, which adds to the complexity of the tariff. India's tariff comprises mainly ad valorem rates (some 94% of tariff lines), levied on the c.i.f. value of imports; and some alternate or specific duties (6.1% of all tariff lines). During the period under review, the average tariff rate declined: the simple average applied MFN tariff was 12% in 2010/11, down from 15.1% in 2006/07. This is reflected in a decrease in both agricultural and industrial average tariffs due to India's shift towards lower tariffs.
Import restrictions may be imposed on grounds of, inter alia, health, safety, moral, and security reasons, and for self‑sufficiency and balance‑of‑payments reasons. India links the use of import restrictions and licensing, and other non‑tariff measures (NTMs) to domestic policies; for example, NTMs are relaxed when imports are necessary to alleviate inflation or shortages. State trading is also used as a policy tool, to ensure, inter alia, a "fair" return to farmers, food security, the supply of fertilizer to farmers, and the functioning of domestic support price systems. India is one of the most active users of anti-dumping measures among WTO Members. Since its last Review in 2007, India has also imposed several safeguard measures. As a result of an amendment of the legislation as of 2010, safeguard measures may also take the form of quantitative restrictions.
As in the case of imports, export prohibitions and restrictions are mainly in place to ensure domestic supply of specific goods and thus may be removed and applied as the circumstances require. In order to reduce the anti-export bias inherent in India's import and indirect tax regime, a number of duty remission and exemption schemes are in place to facilitate exports. Tax holidays are also available to investors through the export‑processing zones and export‑oriented units.
India grants direct and indirect assistance to various sectors. Most central government subsidies are destined for agriculture. Other key subsidies include those for diesel and fertilizers. The states provide additional subsidies, especially for basic services such as education and health, and electricity and water. Price controls apply to some commodities and are used as a means to provide subsidies to farmers and a population under the poverty line, and to ensure a "reasonable price" for quality drugs.
Since its last Review, India has made several amendments to its main competition policy legislation and the Competition Commission of India (CCI) created under the Competition Act 2002 started operations in 2009. In addition, some aspects of the law affecting mergers and acquisitions recently entered into force. India became an observer to the WTO Agreement on Government Procurement in February 2010. Its procurement system continues to be decentralized, comprising a multiplicity of entities at different levels of Government (including numerous central public‑sector enterprises), and no common legislation governing procurement. Public procurement is considered as an important instrument of government policy and is used to obtain certain socio‑economic objectives. As a result, the Central Government has set reservations and price preferences as part of the procurement system. However, competition from foreign suppliers is ordinarily allowed.
India has made improvements in IPR enforcement through increased border protection, and its IP offices continued to pursue promising modernization efforts.
Measures Directly Affecting Imports
Registration and documentation
Since its last Trade Policy Review in 2007, India has continued the process of changing to paperless, electronic customs clearance. Importers (Indians and foreign nationals), with a few exceptions, must register with the Directorate General of Foreign Trade (DGFT) and obtain an importer‑exporter code (IEC) number to be able to import commercially (Table AIII.1).1 Since 2007, registration has been online, through application and provision of supporting documents (e.g. bank certificate and income tax permanent number).2
India has six regimes for entry of imports: (a) imports for home consumption; (b) warehousing; (c) transhipment; (d) transit; (e) re‑importation; and (f) imports for special economic zones (SEZs). For home consumption, importers may clear goods after payment of the duties and charges, or for warehousing without immediate payment of duties. Imports cleared for warehousing require a bill of entry, filed with all supporting documents as required for goods for home consumption. The duty payable is determined by Customs. Duties are not paid at the time of warehousing but at the time of the ex‑bond clearance, for which an ex‑bond bill of entry is filed. The final duty rate is determined when an import declaration is presented for warehoused goods to be imported into the domestic tariff area (DTA). Warehoused goods may be moved from one warehouse to another without payment of taxes (included inter‑state taxes). Inter‑state tax would be payable only if the movement from one warehouse to another entailed an inter‑state sale: in this case, the transaction would be subject to sales tax, entry tax (charged by some states3), and octroi if goods are sold to a warehouse located in the State of Maharashtra. In general, transhipment of containers at Indian ports is allowed without any examination by Customs. Transhipped good require a transhipment bill of lading.4 Transit of goods through India is allowed without payment of duty and without examination by Customs, except if customs officials are informed of the possibility of illegal trade. Goods exported from India may be re‑imported within three years but there must be no change in the classification of the goods. Re‑imported goods are subject to duties, except goods exported for repairs abroad5, for exhibitions, or as samples, which may be re‑imported duty free. Special economic zones (SEZs) are deemed foreign territory for trade operations. Imports into SEZs enter without payment of taxes, duties or cess. They are not subject to customs examination at the port; any required examination will take place at the zone.
To clear goods for home consumption, importers must file a bill of entry, which may be processed manually or through the electronic data interchange (EDI) system. Supporting documents (e.g. invoice, packing list, and bill of lading/airway bill) must be filed along with the bill of entry if it is processed manually. Import licences from the DGFT, and sanitary and phytosanitary certificates from the Ministry of Agriculture must be obtained prior to importation and submitted along with the customs declaration. Additional documentation may also be required (e.g. a country of origin certificate) for goods imported under a preferential trade agreement or under an export incentive scheme and qualifying for duty reductions (section (iv)(e) and (3)(vii)(c)).6 The bill of entry may be filed prior to the arrival of the goods to allow for faster clearance, but no earlier than 30 days before the arrival date of the vessel or aircraft carrying the goods.7
Importers that use the EDI system to clear imports are required to file a bill of entry in electronic format containing all the relevant information; the supporting documents must be submitted when imports undergo physical examination. EDI facilities are available at 92 customs offices.8 About 97.5% of all import documents are processed electronically; about 0.67 million registered IEC holders use EDI facilities.9
In 2005, India introduced a risk management system (RMS) as a measure of trade facilitation to selectively screen only high and medium risk cargo for customs examination. The RMS consolidated the "green channel" clearance facility and other fast‑track facilities to clear goods. The RMS for processing imports is operational at 48 customs offices; some 85% of India's imports are processed via this system. In addition, importers with a good track record and complying with qualifying criteria, are entitled to be accredited for special clearance procedures under the Accredited Client's Programme (ACP).10 As at early 2011, 250 ACP importers are allowed to self‑assess their consignments with no need for examination, in line with India's commitments to simplify and harmonize Customs' procedures under the revised Kyoto Convention.11
Under the RMS, importers file an electronic bill of entry and the system indicates which import certificates, permits, or licences are required. The RMS reviews the documents and provides one of four possible instructions for both ACP (if cargo is considered risky) and non‑ACP importers: (a) imports may be discharged without further assessment (i.e. of their classification, rate of duty or valuation) or examination; (b) imports may be cleared with no further assessment but subject to examination; (c) the release of imports requires further assessment but no examination; or (d) imports must be assessed and examined.12
Certificates of registration and import permits (e.g. certificates of origin, sanitary and phytosanitary certificates, and end‑use certificates) issued by different agencies, are required to import specific goods, in certain instances, depending on their end‑use.13 These certificates must be submitted at the time of filing the bill of entry. Under the Insecticides Act 1968, products that are included in the Schedule to the Act, that have not been registered in India as insecticides, must be imported on the basis of import permit or end‑use (no‑objection) certificate for products used for non‑insecticidal purpose (section (x)). For instance, imports of boric acid for insecticidal use must be registered with the Central Insecticides Board and Registration Committee (CIB & RC)14, as well as an import permit issued by the CIB & RC.15 However, in the case of imports of non‑insecticidal boric acid the administrative ministry concerned (e.g. Ministry of Agriculture) also has to issue an end‑use (no‑objection) certificate prior to the importation, to regulate its use.16 Without the no‑objection certificate, which is issued only to end‑users and not to importers in general, imports are not allowed.17 If these requirements are not fulfilled, imports are confiscated and the importer may be fined and/or imprisoned; these measures are aimed at protecting public health.18
For imports under duty exemptions and free‑trade zones schemes (section (3)(vii)), importers are required to "execute" a bond with Customs. The bond is equal to the amount of payable duty on the imported goods. If importers fail to fulfil the bond conditions, usually related to the fulfilment of post‑importation conditions, they must pay the duty levied on these imports along with interest rates at the applicable rate.19
Customs clearance has been more efficient since 2007: on average, import procedures are completed in 20 days (41 days in 2007), including 8 days for document preparation and 4 days for customs clearance and technical inspections. The cost per container is US$960, including preparing documents (US$390) and clearing customs (US$120).20The implementation of the EDI system in 199421, and the RMS in 2005 at India's major customs offices, has helped to render border procedures more efficient. EDI facilities have been extended to 92 locations and all major customs ports. The number of documents processed through the EDI increased from 3.2 million in 2008/09 to 8 million in 2010/11 (as at December 2010).22
If an importer is not satisfied with the assessment (i.e. the classification, rate of duty or valuation) by the customs officer, the importer may appeal against the "assessment order" (i.e. a decision made in writing by an officer). No data is collected on the number of appeals against "assessment orders".
Preshipment inspection for imports of certain goods has been mandatory since 2004. Goods subject to preshipment inspection include unshredded metallic waste and scrap (since 2004), and shredded metallic waste and scrap (since 2009) (Table III.1).23 Imports of unshredded metallic waste and scrap are permitted through 26 designated ports. Inspections ensure that consignments are free of arms, explosives, and radioactive‑contaminated materials.24 Preshipment inspection certificates are issued by accredited certifying agencies located inside and outside India.25
Metallic waste and scrap subject to preshipment inspection, 2011
Waste and scrap of cast iron
Of high speed steel
Waste and scrap of tinned iron or steel
Turnings, shavings, chips, milling waste, saw dust, fillings, trimmings and stampings, whether or not in bundles
Remelting scrap ingots
Source: Department of Commerce (2010), Handbook of Procedures 2009‑2014, Vol. I, incorporating Annual Supplement, 23 August. Viewed at: http://dgft.gov. in.
Imports of certain types of second‑hand and defective steel products, as well as textiles and clothing articles are subject to preshipment inspection on safety and health grounds.