Indian exporters have been issued notices by the customs department requiring payment for duty differences on rice exported over the past 18 months, four exporters informed Reuters. This uncommon tax demand could severely impact rice exports from India.
The world’s biggest rice exporter implemented a 20% export duty on white rice in September 2022, and subsequently applied a comparable duty on parboiled rice in August 2023 to manage domestic rice prices leading up to the crucial state and national elections in 2024.
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Previously, exporters had to pay a 20% duty based on the rice’s FOB value. Now, the customs department mandates them to calculate the duty based on the transaction value and settle any resulting difference in duty.
The customs department has informed exporters in tax demand notices to pay the export duty, along with any applicable interest, on amounts received exceeding the declared FOB value in the shipping bills.
An exporter from the southern state of Andhra Pradesh stated that they do not have the financial capacity to cover the duty difference for almost two years. Instead, they would opt to shut down their business.
“Now that the government seeks extra duty, no foreign buyer is going to agree to pay us,” he said. Then, how are we going to cover this additional cost of government obligations?”
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Requests for comments were not answered by the Central Board of Indirect Taxes and Customs or the Finance Ministry.
A dealer from a global trade house based in New Delhi stated that, based on the government’s new calculations, exporters would be required to pay an extra duty of approximately $15 per metric ton on rice exported over the last two years.
He said the industry estimates the total cost of this extra duty to be approximately 15 billion rupees.
The president of the Rice Exporters Association, B.V. Krishna Rao, stated that the organisation will be approaching the government to convince them that the existing duty demand is unfeasible.They aim to propose implementing a flat duty on future exports to prevent similar confusion.
“Rice exports function on very slim margins. With this tax issue arising, exporters are preparing to take legal action instead of paying the additional amount,” stated an exporter from Raipur in the central state of Chhattisgarh.
Non-basmati rice from India is mostly exported to China, Bangladesh, and a number of African nations, including Benin, Djibouti, Guinea, Liberia, and Togo.
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