India and Australia’s interim trade agreement is scheduled to begin later this month, amidst the proceedings of the Central Board of Indirect Taxes and Customs has announced the Rules of Origin. The notification will take effect on December 29 and is related to the criteria for claiming the favourable customs duty on goods commerce under the Economic Cooperation and Trade Agreement (ECTA). The ECTA will also take effect at this time.
In order to prevent foreign enterprises from misusing the benefits, RoAs set the threshold for value addition in the country in question to qualify for the tax discounts under the FTA.
The notification by the CBIC spells out the origin requirements based on which the product would be eligible for the preferential customs tariff. It is titled the Customs Tariff (Determination of Origin of Goods under the India-Australia Economic Cooperation and Trade Agreement) Rules, 2022.
The ECTA, which is anticipated to encompass 90% of their bilateral trade, was signed by Australia and India in April of this year. India will profit from the preferential market access that Australia is providing on all of its tariff lines. Over 70% of India’s tariff lines, including lines of export importance to Australia that are predominantly raw materials and intermediaries like coal, mineral ores, and wines, will offer preferential access to Australia.
What qualifies as “Originating Goods” is defined in the Rules. The Rules also define Wholly Obtained or Produced Goods. The Qualifying Value Content Calculation Formula has been outlined.
The exporter or producer must send the importer the Certificate of Origin. The original copy can be required by the customs administration. Annexure-A contains the Minimum Required Information attached. A copy of the product-specific rules of origin is included in Annexure B.
According to experts, firms will be able to assess the value of the ECTA for their products with the help of the CBIC’s notification.
After the ECTA’s tariff notification is released, Indian enterprises must assess the benefits to incoming and outbound trade from the perspectives of supply chain optimisation and improved access to a new market, covering a wide range of commodities or sectors, according to a note from PwC.
“It is important to note that each FTA has its own origin rules and nuances thereof, and given the CAROTAR provisions which were introduced by the Indian government in 2020, the onus is on Indian importer to ensure that the said rules are duly complied with,” said Abhishek Jain, Partner Indirect Tax, KPMG in India.
He added, “As such, for Companies looking to take benefit of the India-Australia FTA, a detailed perusal and compliance of the origin rules remains indispensable.”
India and Australia are each other’s ninth and seventeenth greatest trading partners, respectively. The ECTA is expected to almost double the bilateral trade from $27.5 bn (2021) to about $45 to $50 Billion in the next 5 years.
ECTA is expected to create new employment opportunities, raise living standards and enhance the overall welfare of the people of both countries. Additional employment generation is expected to be 1 million within the next 5 years.
Furthermore, India and Australia’s Comprehensive Economic Cooperation Agreement (CECA) is expected to be finalised by September of next year, according to two people with knowledge of the development, as quoted to Mint. The interim trade agreement between the two nations is scheduled to take effect on December 28.
The general elections in India, which are scheduled for 2024, might hinder trade negotiations with a number of nations, including Australia, making the September deadline for CECA negotiations with Australia more significant. Trade negotiations with the UK, which were planned to be finished by this year’s Diwali, were postponed because of unrest in the country’s political structure.