ROLE OF CUSTOMS IN INDIRECT TAX COLLECTION

PRANAB KUMAR DASMEMBER (CUSTOMS)

MINISTRY OF FINANCE

GOVERNMENT OF INDIA

ROLE OF CUSTOMS

IN

INDIRECT TAX COLLECTION

• Introduction of GST – A transformative Reform in Indirect taxes

• Customs Role in Indirect Tax Collection:

• Legislative Basis

• Harmonization of Procedures:

o Imports and Input Tax Credit

o Exports and Refund of GST

• Leveraging Technology – Integration of Customs Single Window System and GSTN Portal

• Cooperative Framework through MoUs and Audit

• Trader Identification – Customs and GST are based on PAN number issued by Direct Tax authorities

• Focus on Data Analytics

Customs and Indirect Tax Collection

• Bring Clarity, Consistency and Certainty in tax laws

• Increase transparency and make tax administration more responsive

• Create litigation-free environment and ensure low cost of compliance

• Address distortions in duty structures and provide incentives to boost manufacturing

• Simplify and rationalize key business processes

• Create a conducive environment that promotes ease of doing business and Make in India initiative

Introduction of GST

Driven by wish list from Tax Payers

Constitution amended to provide concurrent powers to both Centre & States to levy GST (Centre to tax sale of goods and

States to tax provision of services)

•Central Excise duty

•Additional duties of excise

•Excise duty levied under Medicinal & Toilet Preparation Enactment

•Additional duties of customs(CVD & SAD)

•Service Tax

•Surcharges & Cesses

•State VAT / Sales Tax

•Central Sales Tax

•Purchase Tax

•Entertainment Tax (other than those levied by local bodies)

•Luxury Tax

•Entry Tax (All forms)

•Taxes on lottery, betting & gambling

•Surcharges & Cesses

Central Taxes State Taxes

GST

GST Tax Design : A Federal handshake

13 Central Cesses

Earlier Indirect Tax Structure in India v/s GST

Earlier Tax Regime After GST

•Multiplicity of rates

•Cascading effect of tax on tax- tax credit could not be offsetfully

•Varied business rules /compliance requirements ofdifferent governments

•Border check posts led toefficiency loss in logisticschain and rent-seeking

•Uniform rate in entire country

•Seamless credit flow,complete offsetting of inputtaxes

•Uniform compliance requirements for registration, payment of taxes and return-filing

•Border check postscompletely eliminated. Auniform electronic E-way-billsystem

Legislative provisions linking Customs & Indirect Taxes

• Levy of GST on import under Customs Tariff Act

• Levy of GST Compensation Cess on import under Customs Tariff Act

• Levy of Countervailing duty on petroleum products which are outside GST

• IGST Refund against exports which are zero rated.Two types of Refunds for exporters:

o Pay IGST first on export products and claim refund

o Export without payment of IGST and claim refund of Input Tax Credit (ITC)

6

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

(in M

illion U

SD

)

CVD from July,2016- June, 2017

IGST from July, 2017- June 2018

CVD from July, 2017- June 2018

Collection of GST by Customs

Automated IGST Refund through Customs

Pre-requisites for auto-sanction of IGST refunds by Customs:

• Payment of IGST + Export of Goods

• Exporters file Export declarations and GST Returns on respective portals

• Shipping lines / Airlines file Export General Manifest (EGM)

GSTN

Server

Customs

Server

(ICEGATE/

ICES)

GSTR Returns filed

by exporters

Validated GSTR

Info transmitted

Shipping Bills

filed by

exporters

EGM to be filed

by shipping

lines

SWIFT

24/7 Integrated

System

Importers

Exporters

Customs Brokers

Banks

RBI

Airlines Shipping

lines Freight

ForwardersPorts, Airports

Air cargo complexes

ICD/CFS

Customs & PGAs to

Customs Network

GSTN

Customs Single Window System - SWIFT

GSTN

Settlement

Registration

Payments

Returns

E-way bills

Refunds

Common Portal - Technology Backbone of GST

Goods and Service Tax Network (GSTN)

Tax Payer (GSTN) State-wise Disposal of IGST Refund(% of Total IGST claim)

(July-17 to July-18)(All figures in Rupees Crores)

1

2

1.44

3

4

5

287

877

1,365

1,214

789

921

0

200

400

600

800

1,000

1,200

1,400

1,600

Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18

(In M

illion U

SD

)

IGST CESS TOTAL

IGST Refund in FY 2018–19

• MoU between:

o CBIC handling Indirect Tax (GST) and Customs

o CBDT handling Direct Tax on Corporates and Individuals

o Corporate Affairs Ministry handling Companies Act

• Audit findings shared between Customs and GST

• Risk Profiling of Refunds and flagging suspicious transactions

• Risk profiling of Commercial Imports not getting into Input Tax Credit chain

Cooperative Framework

Taxpayer Identity is common amongst all statutes

Customs and GST Data Analytics

Enhancing Indirect Tax revenue

Mobilisation & Compliance

Increasing taxpayer base

Across GST, Customs & C. Excise

Supporting data-driven tax policy formulation

Leveraging Technology for serving Taxpayers

Analytics on

GST, Customs &

CX data

Public Data

Portal

Predictive &

Fraud Analytics

State of Art Data

Visualization

Skill

Upgradation

Access on

Mobile DevicesBig Data

Real time Data

Capture and

Exchange

Thank You!

“A tax collector should collect taxes from a taxpayer just like abee collects honey from a flower without disturbing its petals.”

- Kautilya, Arthashashtra (2nd Century BC)