Untaxed digital imports like video games cost India $4.9 bn in 4 years

According to a report by a Geneva-based think tank, the loss of revenue was from the import of just 49 products like movies, music, and video games

India lost almost $1.5 billion in 2020 and $4.9 billion in 2017-20 in revenue by not taxing electronic transmissions, a Geneva-based think tank South Centre said in a research paper. 

According to a report in The Economic Times, a research paper by South Centre, which is an intergovernmental organisation of developing nations, stated that India lost its revenue in imports from items like movies, music, and video games. The paper, which comes a week ahead of World Trade Organization (WTO) ministerial meeting, said that custom duties should "regulate conspicuous consumption through imports".

WTO members, in a temporary moratorium, have agreed that they cannot impose custom duties on electronic transmission since 1998. The moratorium has been periodically extended at WTO ministerial meetings even though some nations want to make the pact permanent while India has opposed this rule. 

The paper said India lost $796 million in 2020 and $2.55 billion in 2017-20 in revenue based on applied tariffs (the actual duty levied by nations). 

Developing and least developed nations are losing tariff revenue especially during pandemic when imports of digitised goods have risen. Developing and least developed nations lost $56 billion in tariff revenue during 2017-20, the research paper said. 

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"Not only are they losing the fiscal space but are also losing their regulatory space as they are unable to regulate the growing imports of digitisable products, especially of luxury items like movies, music and video games," South Centre said.

India lost more than $500 million in revenue, as estimated by UNCTAD in 2019. "This shows how the revenue loss is gaining pace because of the moratorium," reported The Economic Times quoting an official.

The paper said, noting that revenue loss is from imports of only 49 products, "With no clarity on the definition of electronic transmissions (ET) and thereby on the scope of the moratorium, the continuation of the WTO moratorium on customs duties on ET can lead to substantive tariff revenue losses for developing and least developed countries in the future".

The think tank has estimated a loss of over $100 million for China, Indonesia, Pakistan, Russia, and South Africa while for India, Mexico, Nigeria, and Thailand, it exceeds $1 billion.