Customs officials in India are demanding further duty payments from approximately 45 prominent rice exporters following the enforcement of a 20% export duty, which could potentially disrupt future rice shipments from the nation.
According to sources familiar with the matter, the department has issued notices to these exporters for the period spanning September 2022 to January 30, 2023, with a potential tax demand of around INR 2,000 crore. Additionally, individuals have reported that some port authorities are requiring rice exporters to settle customs duty before clearing shipments.
Several members of the All India Rice Exporters Association (AIREA) independently verified many notices. Before pursuing legal action, the group is expected to take the exporters’ complaints to the government.
In September 2022, India implemented a 20% export duty on white rice, followed by a similar duty on parboiled rice in August 2023, aimed at managing escalating domestic prices. While there isn’t a current ban on basmati rice exports, a minimum export price of INR 1,200 per million tonnes (MT) was initially set, later revised down to INR 950 per MT.
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Exporters must remit a 20% duty, calculated on the Free on Board (FOB) value of rice. This duty is subsequently transferred to customers as an additional expense. Despite this, customs officials contend that the duty should be levied on the total value invoiced to customers, prompting exporters to settle the variance.
Exporters claim this will amount to “tax on tax”. “There are a large number of such notices where they are computing tax on the transactional value and not on FOB price,” a member of AIREA said, requesting anonymity.
Though exporters nationwide have received notices, the issue appears to be more pronounced at ports in southern India, where shipments are experiencing delays.
Exporters are apprehensive about facing similar tax obligations for other agricultural commodities like sugar, molasses, and onions, which have also been subjected to export duties by the government.
Rastogi Chambers founder Abhishek A. Rastogi stated, “The value is the total amount that you receive from the recipient, including the tax component. That being said, after tax has been paid on F.O.B. value & export duty has been collected from the clients, Indian exporters need not worry about the calculating part in the event of a demand.”
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