Border Adjustment Tax
NITI Aayog favored imposing a border adjustment tax (BAT) on imports to provide a level-playing field to domestic industries.
What is Border Adjustment Tax?
• Border adjustment tax is a short name for a proposed destination-based cash flow tax (DBCFT).
• It is a value-added tax on imported goods and is also referred to as a border-adjusted tax, destination tax or border tax adjustment.
• Exported goods are exempt from tax while imported goods sold are subject to the tax.
• BAT levies a tax depending on where a good is consumed rather than where it is produced.
• The concept was first introduced in 1997 by economist Alan J. Auerbach, who believed that the tax system would be in line with business goals and the national interest.
US-China trade tensions are currently at historic high levels. In the post COVID world, it is expected to rise further so border adjustment tax will provide the domestic industry a level-playing field vis-a-vis imports.
BAT is a duty in addition to the customs levy that gets charged at the port of entry.
Various taxes like electricity duty, mandi tax, clean energy cess, royalty etc. lead to escalation of price.
Such taxes which are imposed on domestic goods, give imported goods a price advantage in India.
PEPPER IT WITH
Basic Customs Duty (BCD), Countervailing Duty (CVD), Anti-dumping Duty
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 tax must be applied equally to imports and "like" domestic products.
A permitted border tax adjustment must not subsidize exports.
Prime Minister Narendra Modi''s Atmanirbhar Bharat vision which helps in advocating self-reliance should not imply that India will embrace isolationist policies. We have to be global but we have to have a supply chain which is more local.