A new customs and IGST model could result in shopping from foreign e-commerce sites becoming costlier by around 50%.

Shopping from Chinese sites may get costly as govt mulls prepaid tax and customs model
Atom E-commerce Monday, February 10, 2020 - 19:08

Buying from Club Factory, Shein or Ali Express may soon get more expensive with the government mulling a prepaid tax and customs for cross-border transactions.

As per an Economic Times report, the idea of a prepaid customs duty and IGST is now being offered to the stakeholders and they are asked to revert back to the government with their own ideas on how this needs to be handled.

The government plans to make foreign e-commerce sites pay duty and GST before making the delivery of the products, which could result in the prices of products on these websites increasing by nearly 50%.

The government is looking at various options, including one where e-commerce platforms will be required to collect taxes from customers and pay the government through an online interface. Another option would be the Indian entity or partner of the foreign e-commerce platform depositing the required taxes. 

This comes after the government has been cracking down on Chinese e-commerce players. Thereā€™s a provision in the Indian Import Export policy that allowed gift items to be imported into India by post if their value is less than Rs 5,000. Many sellers of these e-commerce websites would ship products as gift articles and show an invoice value for Customs purposes of less than Rs 5,000. When the Mumbai Customs got the tip-off they started monitoring, they found that several parcels were being sent to the same address and the products inside were found to be valued at much higher than Rs 5,000.

The government then stepped in and first removed the duty-free gift clause. The only two items spared were life-saving drugs and raakhis. The traders being clever as they are tried changing their port of clearance from Mumbai to other ports and even that has been thwarted.

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