WTO June meet: India not likely to create a hurdle on e-com moratorium

India may not create a big issue out of the proposed extension of the moratorium on Customs duty on electronic transmissions at the World Trade Organization’s (WTO’s) crucial meeting scheduled from June 12. At present, under the WTO moratorium, countries do not impose Customs duty on cross-border e-commerce transactions.

Developing countries, including India, have been battling for policy space to impose Customs duties on electronic transmissions. They said that the moratorium has adversely impacted revenue collections.  

“The moratorium has been going on for 24 years since 1998. We calculated and the revenue loss is a small amount. We have become such a big exporter through e-commerce that if the moratorium is lifted, it may even hurt us more. That’s why we have to be careful while opposing it. In 1998, we had negligible e-commerce exports. Our information technology exports grew only after 2000,” said a senior government official, indicating a shift in India’s stance on the matter.

India and South Africa had in the past made several joint submissions at the WTO, highlighting the adverse impact of zero Customs duties on electronic transmissions or digitisable products on developing nations.

Review of the moratorium can help developing countries generate more revenues through Customs duties, they had argued.

Developing countries, including India, fear that with the advent of artificial intelligence and 3-D printing technology, products that are now delivered through offline mode could be easily transferred electronically.

This will make Customs duties on products irrelevant.

In 1998, WTO members agreed not to impose Customs duties on electronic transmissions and the moratorium has been periodically extended at successive ministerial conferences.

In the previous ministerial conference in 2017, the moratorium was extended for two years, and thereafter, they agreed to maintain the current practice up to Ministerial Conference 12 (MC12). At MC12, many WTO member nations are seeking temporary extension of the moratorium until the next ministerial.

According to an UNCTAD report released in 2019, the potential tariff loss to developing countries is estimated at $10 billion annually. Tariff loss to less developed countries is estimated at $1.5 billion and $500 million in case of India. India is witnessing an exponential rise in imports of electronic transmissions, mainly items like movies, music, video games and printed matter. Some of these could fall within the scope of the moratorium.

While the profits and revenues of digital players are rising steadily, the ability of the governments to check these imports and generate additional tariff revenues is being severely limited. This is because of the moratorium on e-commerce.