Illicit trade cannot be curbed by simply “raising or reducing tax rates”, Central Board of Indirect Taxes and Customs (CBIC) chairman Vivek Johri believes. His theory is backed by internal studies.
“In the case of gold, our study shows there was no correlation between the rate of tax and smuggling and despite the tax rate reducing, smuggling increased. There have been many instances of tax avoidance where the rate is very low – even in sectors where goods and services tax (GST) rate is 5 percent,” Johri said at a FICCI meeting against smuggling and counterfeiting activities.
Without naming a commodity, Johri hinted at the fact that tax rates for sin goods such as cigarettes and tobacco products are at levels from where they can’t be hiked anymore. He shared that apart from gold, cigarettes and narcotics were the major items that were smuggled in and out of the country.
“In 2021-22, the Customs department seized 92,000 kilos of narcotics worth ₹17,400 crore and recovered cigarette sticks worth ₹14 crore,” he said. “We have had concealment of gold, narcotics in cargo every other day. Cases of concealment of consumer goods such as mobile phones and cosmetics have also become frequent.”
What helps illicit trade to grow?
Johri said the Customs department was devising better ways to curb commercial frauds and tax evasion by way of the wrong classification of goods.
He shared that as far as commercial cargo is concerned, the three major areas leading to unlawful trade are – misuse of free-trade agreements (FTAs), wrong declaration of country of origin, and value addition norms not fulfilled. Misuse of export promotion schemes, wrongful utilisation of scrips, and the misuse of end-use based exemptions also happen.
And so, CBIC, Johri said, is taking help from technologies like Artificial Intelligence and data analytics.
How is tech helping curb smuggling
Johri said that a large number of narcotics seizures is based on profiling of cargo and taxpayers through CBIC’s data analytics and the use of video scopes to help scan cargo. The Customs department had been also using canine squads to detect fake currency and narcotics.
“We are setting up railway scanners to scan all containers moving from sea to via rail. Cargos at ICDs (Inland Container Depots) are getting examined based on local Customs intelligence. Scanning is a very effective, non-intrusive way,” Johri said.
Blockchain to CBIC's help
He shared that the CBIC will use blockchain technology for cargo movements. A pilot has already been run at warehouses and has yielded good results in reducing illicit trade.
Johri said that CBIC is now considering using blockchain technology in special economic zones (SEZs) and export-oriented units (EOUs). This, coupled with “extensive use of RFID (Radio Frequency Identification) tagging of both export and import containers”, will help CBIC track cargo end-to-end, including at all toll plazas.
First Published: May 12, 2022 6:58 PM IST
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