Indian rice exporters are currently confronting a challenging situation as notices from the customs department are demanding payment of duty differences on rice exported over the past 18 months. This unexpected tax demand has the potential to severely impact rice shipments from India, with exporters voicing concerns about their ability to fulfill these financial obligations. The implementation of a 20% export duty on white and parboiled rice by the world's biggest rice exporter aimed to regulate domestic rice prices in anticipation of upcoming state and national elections in 2024.
The customs department has now altered the duty calculation method for exporters, shifting from the previous FOB value-based approach to one that considers transaction value, leading to additional duty demands for the exporters. Exporters have expressed their distress over the financial strain this unexpected demand has placed on them, stating that they lack the financial resources to cover the duty differences for nearly two years, potentially forcing them to cease their operations. With the new duty demands from the government, exporters are concerned about overseas buyers being unwilling to pay additional costs, raising doubts about their ability to comply with the government's requirements.
As per industry estimates, the additional duty on rice exported in the past two years could amount to around $15 per metric ton, with a projected total cost of approximately 15 billion rupees. The Rice Exporters Association is planning to engage with the government to advocate for a more practical approach to duty demands and propose a flat duty on future exports to prevent similar challenges. Exporters in various states, including Andhra Pradesh and Chhattisgarh, are contemplating legal action against the government's tax demands rather than acceding to the financial burden placed on them. Despite the strong position of India as a major rice exporter to countries like China, Bangladesh, and African nations, the current tax dispute has introduced uncertainties and potential disruptions in the rice export industry.