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Custom will See Structural Reforms Soon on the Line of GST : See the complete Details

To increase the transparency and elimination of renk seeking in custom clearances, CEO of Niti Aayog, think tank of India chairman of which is Prime Minister himself, has written a letter to Revenue Secratary highlighting “pain points or blockade” in custom clearance which has bearance on Indian Businesses especially exports along with suggestions which may be implemented soon.

It has highlighted among others that filed officers have enormous powers to raise irrelevant queries without any accountability, which generally results in Rent Seeking and speed money.

Therefore it has suggested one important structural change among others is to implement National Trade Network ( NTN) on the line of GSTN to make whole process transparent and system based. Complete details about NTN is provided in suggestions segment of article.

Let’s first discuss the Problem Areas highlighted by Niti Aayog before discussing the suggestions giving by them:

Hindrances in Custom Clearances as Highlighted by Niti Aayog

1. Today System is so complex and vague that MSMEs and other small firms can not export directly, they have to export through Export Houses or other Third Parties which increases the cost of Business and reduce the competitiveness of Indian Products in world market.

2. The Niti Aayog has flagged that “Customs field authorities are legally or otherwise vested with enormous powers to raise irrelevant queries with no accountability. To avoid delay and harassment, trade agrees to speed money”

3.Officers randomly ask Custom House Agent (CHAs) to open consignment. Percentage of shipments undergoing physical examination is still very high. While officially RMS (Risk Management System)cleared shipments are not required to be physically inspected, customs officers might still require a ”physical check” for a variety of reasons.

“This results in delays (officer has to be first identified/deployed and then physically travel to where the goods are being held), discretion (once there, there is no guaranteeing what documents or even physical inspection the officer might want to do), and rent-seeking”, it pointed out.

4. Notifications issued by Custom department are so complex that “It is impossible for a layman (and often for individual with expertise, including the CBIC officials) to actually figure which rules, procedures and regulations are extant for specific types of trade situations. The ”paper” mess has simply been digitised”.

5. Niti Aayog has also highlighted that there is cartelization between shipping lines and others. Cartelized behaviour between shipping lines and their agents, CFS operators (and in some case terminal operators) and freight forwarders/brokers often results in escalation of bills and firms are made to pay for unnecessary charges.

Suggestions by Niti Aayog

1. Implementation of National Trade Network: Kant has said in the letter that the time has come to set up the NTN on the lines of GSTN integrating all departmental data flows into one integrated system.

National Trade Network (NTN) will enable all export-import related compliance online. The NTN will allow exporters to file all information/documents online at one place; there will be no need to deal with customs, DGFT, shipping companies, sea and airports, and banks separately.

The inbuilt system intelligence will route the required information to the appropriate agencies. Centralised submission, assessment and processing will minimise the need for posting of large numbers of officers at the local customs house, central excise or DGFT offices.

With NTN, while officers may continue to be located in different locations physically, they will be available to assess files submitted anywhere in the country.

A service agreement will bind all organisations to respond within 2-5 hours, and enable users to receive permissions online, Niti Aayog said

This will also radically reduce the cost of transaction and make India a highly efficient country.

2. Improvement in Risk Management System and Accountability of Officers:

Niti Aayog has suggested that Customs uses a sophisticated Risk Management System or RMS. But many times, Customs officers have reasons to reject the RMS recommendations and go for inspection of the goods.

The basis of decision making must be entered into the system, and available under the RTI with adequate anonymisation of individual shipments and their consignees, along with figures indicating to what extent in percentage terms the over-ride led to an actual finding of non-compliance.

Customs may use this data for developing analytics tools that will further reduce RMS over-ride by establishing guidelines for officers for making such decisions, it has recommended.

3. Another important recommendation is to improve the information flow. The first task is to use simple language and ensure transparency in issuance of notification.

For example, notifying import duty is a crucial task of Customs. Yet, finding correct customs duty for a product is a pain. You need an expert to wade through the maze of hundreds of customs notifications issued every year.

The notifications are not self-contained and amend part of an earlier notification issued years ago”, the recommendations said.

We hope with the implementation of suggestions by Niti Aayog, it will certainly boost Indian Exports besides improving Ease of Doing Business Ranking of India at Global Level.

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