The Central Board of Indirect Taxes and Customs (CBIC) recently announced a plan to roll out pan-India faceless assessment by December 31, 2020. Faceless assessment is expected to be a game-changer in the post-Covid era and could also become the new normal in Customs assessment. Faced with the daunting task of processing over 1.25 crore export-import documents annually on a 24x7 basis while safeguarding revenue and national security, the CBIC has been taking innovative steps with its flagship programme, ‘Turant Customs’, to introduce next-generation reforms for ease of doing business.

What is ‘faceless assessment’? To understand this better, we need to go back a few decades. Earlier, when goods were imported into India, they were assessed for Customs duty by the jurisdictional Customs officers on the basis of physical documents. In 1985, mainframe computers were first used by the CBIC for import cargo documentation and automation of assessment. Upgradation to the more advanced computer systems was done from time to time to render better services. Twenty years later, a technology-driven risk management system (RMS) was deployed to enable most of the cargo to be cleared through a green channel or with minimal checks, while interdicting risk-prone cargo for assessment and examination. In 2011, the Customs Act was amended to introduce the concept of self-assessment by importers/exporters themselves, along with physical checks by Customs officers.

With the introduction of faceless assessment, the Customs Department proposes to replace physical interaction with an online interface for verification of self-assessment. Two faceless assessment groups (FAGs) have been constituted in Chennai and Bengaluru.

Sector-specific assessment

Despite digitisation and streamlining, disparities in assessment prevailed due to interpretation issues. Consequently, unhealthy practices like mis-declaration and port shopping led to disputes and litigation. In this context, an acute need was felt within the Customs Department to provide uniformity in assessment practices and assurance of certainty, consistency and standardisation. To achieve these goals, the CBIC intends to form virtual ‘national assessment commissionerates’ (NACs). Each NAC will specialise in a broad industry sector to build expertise in classification and valuation, as well as industry practices in that specific domain. For instance, if there is an NAC for the automobile sector, then the Customs automated system will randomly assign all non-facilitated bills of entry for the sector across the country to different officers. After the importer digitally signs and uploads the required documents, the officers belonging to the respective NAC will be able to expeditiously process the same and ensure correctness and uniformity in assessment.

In case there is still a necessity to physically examine the imported goods, the NAC can get it done with the help of the jurisdictional port commissionerates (JPCs) in the respective Customs locations. The role of the newly introduced Turant Suvidha Kendras would be critical to the execution of faceless assessment.

Such an innovative change in Customs assessment procedures calls for a strategic realignment of roles and responsibilities with legislative backing, re-engineering of IT systems, and, more importantly, a reorientation in the mindset of all stakeholders. Anonymity and absence of physical interaction would do away with rent-seeking behaviour. However, a secure official interface would still be needed for sharing documents.

The challenge lies in streamlining and monitoring the interaction process. Several other connected procedures pertaining to valuation of related-party transactions, post-clearance audit, review and appeal need to be revisited. Also, the CBIC should refrain from reopening the assessment practices adopted by these NACs, except in rare cases such as fraud or mis-declaration.

The first phase of faceless assessment has just commenced in Chennai and Bengaluru and the results need to be analysed before a pan-India rollout. Even in developed economies like the US, a similar initiative was run on a pilot basis to assess the risks and problems. The US Customs and Border Protection (CBP) started off with two Centers of Excellence and Expertise in 2012. One was formed in Detroit for automotive and aerospace sectors and another in Houston for petroleum, natural gas and minerals sectors. Eight more centres were established later.

The key takeaway from the CBP experience is the mutual trust and cross-learning that arose from close interaction with the industry groups. The CBIC would do well to kickstart sector-specific Customs consultative groups with support from industry groups to nurture the NACs. Over time, these NACs will develop into a pool of domain-specific expertise.

Faceless assessment heralds a paradigm shift in the CBIC’s endeavour to help India become one of the top 50 countries in the World Bank’s ease of doing business rankings.

The writer is former chairman, CBIC, and Managing Director, Indirect Tax, PwC India

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