Budget 2024 Eases Customs Act To Facilitate FTAs With UK, EU

To pave the way for signing free trade agreements (FTAs) with developed nations such as the UK and the European Union, the Union Budget 2024 has introduced significant amendments to the Customs Act. These changes aim to liberalise compliance with value-addition norms, which typically guard against the misuse of concessions agreed upon in trade pacts.

Value addition norms, guided by ‘rules of origin,’ are crucial as India signs multiple FTAs. These rules determine the national source of a product, ensuring that trade agreements boost trade volumes with partner countries without enabling third countries to benefit from concessions, which could lead to revenue losses if breached.

On Tuesday, the government amended Section 28DA of the Customs Act, 1962, replacing the term ‘certificate’ of origin with ‘proof’ of origin. The budget defines “proof of origin” as either a “certificate” or “declaration” in accordance with a trade pact.

Tax experts highlighted that the amended Customs Act now allows for the acceptance of “proof” of origin, a broader term that includes both a certificate of origin and a self-declaration, aligning with global customs norms. However, they expressed concerns about implementation, noting that allowing self-certification could lead to breaches and require a high level of integrity in the exporting country, without which India could lose customs revenue.