Port development and world trade, which are closely interrelated, play a crucial role in a country’s economic growth. While ports expand the market opportunity of both national and international firms, customs assess and collect revenue, prevent smuggling, ensure application of national legislation to imported goods, provide reliable trade statistics, and work as the most important source of revenue for a country.
Port development and shipping industries are not mutually exclusive of each other. Shipping industry is responsible for economic fluctuations in the market, which can either boost or adversely impact imports and exports. According to a report by the Ministry of Shipping, around 95% of India’s trading by volume and 70% by value is moved through maritime transport.
The ruling government’s new economic reform, that is, the Goods and Services Tax (GST), had an adverse effect on the shipping industries across the country. A 5% GST (integrated GST or IGST) was levied on Indian shipping companies that ferry cargo from or to India. Not just that, the 5% levy is also applied to the Indian companies that buy or sell vessels.
This has put the Indian companies at a disadvantage compared to foreign companies that can carry out same activities without any taxation in India. The GST will adversely impact the Indian ship owners on account of 5% IGST on ship acquisition. Indian ship owners will not be able to claim CENVAT on duty paid coastal bunkers, coupled with withholding tax on wages, borrowings, this will definitely make Indian companies uncompetitive The real problem is the fact that the 5% levy is a pure cost as no credit can be taken against that. The 5% levy on Indian shipping companies is not just limited to buying and selling of vessels but also impacts their service side and could mean losing customers to overseas companies. Indian shipping companies are required to pay 5% GST on export cargoes carried for Indian customers, which is not applicable to foreign ships carrying the same cargo. As a result many Indian customers are using products of foreign companies rather than those of Indian companies.
Recently, the Calcutta Customs House Agents’ Association (CCHAA), in their 60th Annual General Meeting focused on improving trade relations with countries in the South East Asia with a special reference to Nepal.
H.E. Eanknarayanaryal, the Counsel General of Nepal, Kolkata, stated that Nepal is conversant with the Calcutta Customs House Agents’ Association and the crucial role that it plays in trading with Nepal. He said, “India contributes substantially to shipping and clearing and forwarding Nepalese goods from abroad. We are acting upon trade facilitation with India as well as wish to transit trade through Calcutta Port and shall provide services, which will help establish a smooth trading relation with India. We are trying to resolve issues, which might hinder trading relation with India”. CCHAA will also play a crucial role in facilitating and furthering a smooth trading relation with Nepal.
“In the era of science and technology, CCHAA will have an important role to play in trade transit and Nepal is looking forward to it”, H.E. Eanknarayanaryal added.
CCHAA had participated in an International Seminar in Dhaka, which involved countries from South Asia and South East Asia, namely, Bangladesh, India, Myanmar, Sri Lanka, Thailand, Bhutan, and Nepal, to work closely on facilitating connectivity in the Bay of Bengal Region, which would involve all modes of transportation to integrate land corridors with other modes of connectivity in the region.
BE spoke to Bijay Kumar, IRS Chief Commissioner of Customs (Airport and Admin), on reforms in the sector.
Q. What do you think has been your greatest achievement with regard to the latest governmental reforms like the GST?
A. I have been in charge of the GST propagation and the GST outreach programme in the service tax and custom house SGST department. Both the government departments and other apex bodies performed really well and gained the top position. The implementation of the GST has been so successful in West Bengal that it is now in the number one position in the country. Initially, it was Mumbai, Hyderabad, Ahmadabad or Chennai but now it is West Bengal that is leading. Our greatest achievement has been in registering maximum people under the new tax system. Along with the people who have already registered, 14% have been convinced of the idea and shall register sometime soon. Prime Minister Narendra Modi wants a similar successful result in the customs and income tax department as well.
Q. How far has West Bengal been successful as far as the industrial sector is concerned?
A. West Bengal is performing really well compared to the other states in the country. It is witnessing ushering of a large number of micro and medium scale industries.
Q. What reforms do you wish to bring about in the customs department and why?
A. I am working to establish an independent commissionerate of the customs at Siliguri because of border management with Bhutan, Bangladesh, China as well as Nepal, which initially appeared to be a far-fetched dream. To improve the trade dealings with these countries, we need a proper commissionerate and trained staff.