Trade Talks

On April 1st, 2023, the DGFT (Directorate General of Foreign Trade) announced a new Foreign Trade Policy, which came into force on the same date. The earlier Foreign Trade Policy 2015-20 was supposed to be valid up to March 31st, 2020. However, it extended up to March 31st, 2023 because of various scenarios like, the COVID-19 pandemic, etc. If we compare India’s merchandise export and service export in FY 2016 (at the beginning of Foreign Trade Policy 2025-20), it was USD 435 billion. It is expected that the export may grow up to USD 760 billion by the end of FY 2023, which is almost 75% growth. Here, being an exporter, you can judge that the export business has good potential in near future. Export has a direct relation to key economic factors like demand and supply. This means Indian goods and services have ample demand in the world market and the only question remains seizing the opportunity at right time. In short, companies that are in the export business have an opportunity to fl

In last month’s Cross-border Trade Val-bytes, we understood Cross-border Trade Valuation for exported goods and for imported goods in a nutshell. I hope my previous article helps you to understand the significance of valuation in international trade. In this month’s article, we will focus on the valuation of exported goods in a more comprehensive manner. Determination of Export Value: The value of the export goods shall be based on the transaction value of goods of like kind and quality exported at or about the same time to other buyers in the same destination country of importation or in another destination country of importation adjusted. While determining the value of export goods several factors are taken into consideration like commercial levels, quality levels, differences in composition, quality, and design between the goods to be assessed and the goods with which they are being compared, differences in domestic freight, and insurance charges depending on the place of exportatio

In last month’s Cross-border Trade Val-bytes, we saw an introduction to Cross-border Trade Valuation. I hope my previous introductory article helps you to understand the significance of valuation in international trade. In this month’s article, we will try to boil down the valuation in a more comprehensive manner. Valuation is broadly defined into two parts in the form of rules namely: Customs Valuation (Determination of Value of Exported Goods) Rules, 2007 The value of the export goods shall be based on the transaction value of goods of like kind and quality exported at or about the same time to other buyers in the same destination country of importation or in another destination country of importation adjusted. While determining the value of export goods several factors are taken into consideration like commercial levels, quality levels, differences in composition, quality, and design between the goods to be assessed and the goods with which they are being compared, differences in do

Valuation is one of the key components of import-export activities. The word ‘Valuation’ is exclusively defined in the Customs Act, of 1962. According to the act, valuation means the transaction value of the imported goods and exported goods; the price actually paid or payable for the goods when sold for export to India for delivery at the time and place for importation. In terms of export, this can be exported from India for delivery at the time and place of exportation. To define the valuation at arm’s length basis, the buyer and the seller are not related and the price is the sole consideration for the sale subject to such other conditions. If we jot down the term ‘Valuation’, then it can be any amount paid or payable for costs and services, including commissions and brokerage, engineering and design work, royalties and license fees, costs of transportation to the place of importation or exportation, insurance, loading-unloading, and handling charges, etc. The Basic Customs Duty (BC

As per point (i) of para 7.01 and para 7.02 of the Foreign Trade Policy (2015-20), Quote “7.01 Deemed Exports (i) “Deemed Exports” for the purpose of this FTP refer to those transactions in which goods supplied do not leave country, and payment for such supplies is received either in Indian rupees or in free foreign exchange. Supply of goods as specified in Paragraph 7.02 below shall be regarded as “Deemed Exports” provided goods are manufactured in India. 7.02 Categories of Supply Supply of goods under following categories (a) to (d) by a manufacturer and under categories (e) to (h) by main / sub-contractors shall be regarded as “Deemed Exports”: A. Supply by manufacturer: (a) Supply of goods against Advance Authorisation / Advance Authorisation for annual requirement / DFIA; (b) Supply of goods to EOU / STP / EHTP / BTP; (c) Supply of capital goods against EPCG Authorisation;” Unquote Further, para 7.03 of the Foreign Trade Policy (2015-20) says, Quote “7.03

Depending on the design of a country’s tax system, application of the arm’s-length principle may be relevant in determining the taxable objects for one or more direct taxes (income tax, corporate tax, profits tax, etc.). Generally, most countries’ transfer pricing legislation has broad application across direct taxes. One notable exception being Ireland, where the transfer pricing legislation introduced in 2010 applies only to certain classes of income for direct tax purposes.  Countries with other specific types of direct taxes governing specific sectors or transactions types (such as a mining income tax) may need to consider application of transfer pricing legislation to them. Typically, this would be achieved through separate provisions being inserted in the relevant taxing acts. However, where a consolidated tax code has been adopted, a single set of legislation may be possible. Transfer pricing provisions may also be necessary for other types of taxes such as a resources royalty p

To understand ‘BEPS 2.0’ first we need to understand what BEPS is. BEPS (Base Erosion and Profit Shifting) is a tax planning strategy that is used by MNCs to shift their profits from high-tax jurisdiction to low-tax or no-tax jurisdiction. Basically, companies erode the tax base through deductible payments such as interest and royalties, which is undoubtedly an unfair practice to local tax authorities. To limit these practices OECD identified 15 action plans in 2015. But a number of problems remain outstanding, particularly regarding digitalization and the digital economy. Hence, on 29th January 2019, OECD came up with new proposals to combat BEPS activities. Which are generally called ‘BEPS 2.0’. This new policy fills the gaps and answers the questions which remained unanswered in ‘BEPS 1.0’. As of now, there are Pillar One and Pillar Two proposals announced under ‘BEPS 2.0’. Pillar One focuses on coherent review in profit allocation, whereas Pillar Two focuses on exercising of prim