Shopping overseas? Duty cut feeds import impulse

Shopping overseas? Duty cut feeds import impulse

Shopping overseas will cost you less from April as the amount of tax you pay on foreign goods to get them to India is getting reduced. The budget has proposed to lower the tariff rate (basic customs duty) on all dutiable goods imported for personal use from 20% to 10%.The change, once implemented, will apply to online purchases as well, said Meyyappan Nagappan, partner, tax and impact finance at Trilegal. “The reduction in customs should also reduce the integrated GST charged on imported goods. Many e-commerce websites sell to Indian customers without taking any responsibility for customs, GST or importation processes in India. This will bring down the cost of such transactions for consumers,” Nagappan said. When a foreign good is purchased online, consumers typically use the services of a customs house agent to have it cleared from customs and pay the duty. Import duties are levied beyond a certain threshold (in terms of value of the product) which varies depending on the product.At a time when the weakening rupee is pushing up the cost of imported goods, the move is somewhat expected to soften the blow on consumers, making products more affordable. iPhones, electronic gadgets, premium and luxury bags and shoes are among the most popular items that Indians tend to splurge on when shopping abroad. Rising disposable incomes are allowing more middle-class households to spend on overseas travel and shopping, both offline and online. Many of them are also taking to luxury consumption of perfumes and fashion accessories. Indian tourists, for instance, are among the biggest spenders on luxury goods in Singapore, a report published by a top business association of the country last year showed. Personal imports of items such as electronics and accessories will now become more affordable, Sohrab Bararia, partner at Grant Thornton Bharat.“The measure aligns customs provisions with inflation and evolving travel patterns while easing the cost of personal imports,” said Vimal Pruthi, tax partner, EY India. Tariff relaxation will also curb informal channels and encourage compliance with official customs procedures, said experts.“Imports under this category for personal use are typically high-volume but low yield from a revenue and litigation perspective. As such, a lower rate of duty would likely improve compliance and reduce friction on valuation disputes and discretionary assessments at the passenger interface. Holistically, this change is consistent with the objective of reducing financial burden on households,” added Ayush Mehrotra, partner, Khaitan & Co.