The Budget showcased some radical moves of the Union Government to streamline the taxation regime in India. The Indian taxation regime is being modified to facilitate free trade, promote higher investment and ensure revenue generation for the Government. One such move is the introduction of self-assessment based import-export clearances and on-site customs audit at the premises of the importer/exporter.

Self-assessment is a dynamic departure from the existing structure governing customs clearance of goods. Introduction of this procedure shifts the responsibility of assessment to the importer/exporter, while the power to verify such assessments and make re-assessment remains with the Customs.

As a consequence of this procedure, the onus of ensuring that appropriate and accurate declarations such as classification, duty rate, value, imported/ export goods, are factored at the time of self-assessment rests with the importer.

The Customs department can selectively verify bills of entry on the basis of the output of the Risk Management System, which ensures that on the basis of certain rules and intervention, high-risk consignments are identified for detailed verification before clearance.

The procedure for provisional assessment is also being suitably modified to align it with the self-assessment system. A draft circular of the Central Board of Excise and Customs (CBEC) dated July 29, 2011, inviting comments in respect of the draft Customs (Provisional Duty Assessment) Amendment Regulations, 2011, is a step in this direction.

The scheme for ‘On Site Post Clearance Audit' has been introduced for protection of the Revenue's interest in case of clearances based on self-assessment.

On-site audit deals with the verification of declarations and underlying documentation at the premises of the importer/exporter. It empowers the Customs to inspect the books of account of the company in addition to verifying import/ export-related documentation.

A draft circular dated August 1, 2011, pertaining to ‘On-site Post Clearance Audit at the Premises of Importers and Exporters Regulations, 2011' is a welcome move by the CBEC and outlines the obligations of the importers/ exporters, the manner of conducting the audit and the penal consequences in case of non-compliance.

Introduction of the above changes would result in higher accountability of the importer / exporter on customs assessment and increased visibility of the trend in import/ exports, the financials of the company and transfer pricing documents.

The Customs department is gearing up to re-align its internal systems and processes with the above mentioned changes.

Customs officers need to be trained to ensure that trade encumbrances are not created on account of minor infractions, the sensitivity of business and commercial information is not compromised and such changes are effectively implemented. Simultaneously, industry will have to develop systems and processes and in-house expertise on customs assessment and audit to cope with this change.

While the legal provisions for self-assessment have been in place since April 8, 2011, and the first audit team is expected to visit the premises of the importers in the near future, the industry has not been given sufficient time to develop systems to deal with such change.

This may lead to ground-level issues, which might trigger unwarranted disputes between the Customs and the importers/ exporters.

In conclusion, while the ‘self-assessment procedure' and related procedural changes is aimed at promoting foreign trade by easing the compliance norms and revamping the assessment procedure, its effective implementation is expected to face its share of teething problems.

For ensuring smooth implementation of these procedures, necessary steps should be initiated to settle any unwarranted implementation gaps.

(The author is partner and leader, Indirect Tax, BMR Advisors.)

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