INDIA – Indian rice exporters are facing a significant challenge as they grapple with hefty tax demands from customs authorities, jeopardizing the country’s rice exports.
This development comes amidst efforts by the Indian government to control domestic rice prices through new export duties, adding pressure on exporters already facing financial constraints.
Customs authorities have issued notices to Indian exporters, demanding payment of duty differentials on rice exported over the past 18 months. This unexpected tax demand poses a severe threat to rice shipments from India, a key player in the global rice trade.
The imposition of export duties on rice began in September 2022, with a 20% duty on white rice, followed by a similar duty on parboiled rice in August 2023. These measures were introduced to stabilize domestic rice prices ahead of crucial state and national elections in 2024.
However, exporters were initially paying duty based on the Free on-board (FOB) value of rice. The recent demand from customs requires them to consider transaction value, resulting in additional duty payments.
Exporters, already struggling with financial limitations, are finding it challenging to meet these demands. Some fear that this could force them out of business entirely.
“The government is now demanding additional duty, which no overseas buyer will pay to us. How could we then pay the additional duty to the government?” questioned an exporter based in Andhra Pradesh.
According to government calculations, exporters may owe an additional duty of approximately US$15 per metric ton on rice exported in the past two years, amounting to an estimated total of 15 billion rupees.
The Rice Exporters Association intends to engage with the government to address these concerns, advocating for a more practical approach to taxation on future exports.
In response to the situation, some exporters are considering legal action rather than complying with the tax demands.
“Rice exports operate on razor-thin margins. With this tax thing popping up, exporters are gearing up to take it to court instead of coughing up the cash,” remarked an exporter based in Chhattisgarh.
India’s rice exports primarily target markets such as China, Bangladesh, and several African countries. The current predicament faced by exporters threatens not only their businesses but also the country’s position as a major player in the global rice trade.
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