Border Adjustment tax

WHY IN NEWS?

• A NITI Aayog member has favored imposing a Border Adjustment Tax (BAT) on imports.

ABOUT BAT:

• It’s a duty that is proposed to be imposed on imported goods in addition to the customs levy that gets charged at the port of entry.
• The Border Adjustment Tax is proposed to be a non-creditable levy on imported goods. The idea is to bring similar goods in the imported and domestic baskets at par.
• The Indian industry has been complaining to the government about domestic taxes like electricity duty, duties on fuel, clean energy cess, mandi tax, royalties, biodiversity fees that get charged on domestically produced goods as these duties get embedded into the product. But many imported goods do not get loaded with such levies in their respective country of origin and this gives such products price advantage in the Indian market.
• The Commerce and Industry ministry has agreed that this demand of the Indian industry is reasonable and is convinced that the domestic uncreditable duties on 'Made In India' goods put them at disadvantage vis-a-vis similar imported products.
• Extra customs duties like BAT however has a high chance of getting disputed and can lead to India being dragged to international arbitration under WTO.
• India’s Commerce Ministry believes that the proposed extra customs duty through the Border Adjustment Tax is compatible to global trade norms under WTO.

PRELIMS QUESTION:

Q. Consider the following statements regarding Border adjustment tax:

1. It is proposed to be imposed on goods transport between states of India.
2. It will help increase the GST compensation fund.

Which of the statements given above is/are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

Answer D

">Answer to Prelims question