India Regulatory Brief: India Offers Tariff Reduction on China Goods and Telecom Imports to Be Screened from April 2017

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Ongoing RCEP Negotiations – India Offers China Tariff Concessions on Over 70% Goods

Under the ongoing negotiations for a Regional Comprehensive Economic Partnership (RCEP) agreement, India is proposing to offer tariff elimination on over 70 percent of goods from China. In addition, India has offered the highest level of tariff elimination to the member countries of the Association of Southeast Asian Nations (ASEAN) during a bilateral meeting in Indonesia.

To protect its domestic industries, such as steel, the Indian government will extend the tariff elimination period by up to 30 years. Other member countries to the RCEP want shorter adjustment periods. However, India is committed to a longer phasing out period, having forgone its proposed three-tier tariff concession system at the Laos Ministerial session in August. India’s next big concern is with regards to negotiations on the services agreement.

With the President-elect Donald Trump announcing that the US will reject the Trans-Pacific Partnership (TPP) agreement once he takes office in January, the RCEP countries are keener than ever to arrive at a comprehensive free trade agreement. This will in turn establish the world’s largest regional trading bloc. Begun in 2013, RCEP consists of the ASEAN economies (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) and six of its free trade partners (Australia, China, India, Japan, New Zealand, and South Korea). The next round of RCEP talks is to be held in February next year in Kobe, Japan.

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Government to Disclose Disputes Negotiated under Mutual Agreement Procedures (MAPs)

The government intends to disclose the number of disputes being negotiated under the Mutual Agreement Procedures (MAPs) of tax treaties along with the resolution time for such disputes. This is in line with Action 14 of the Base Erosion and Profit Shifting (BEPS) project involving the G-20/OECD countries. Action 14 calls for reform measure to make dispute resolution mechanisms more effective and transparent, mandating that all participating countries provide details pertaining to tax disputes being negotiated under the MAP Article of tax treaties.

The details will be provided in the established templates that contains the information about inventory of cases and outcomes of cases. These details include the number of cases pending under MAP, number of cases fully resolved to eliminate double taxation, and the number of cases pending resolution.

The government’s position was stated by the Ministry of Finance in a written reply to a question in the lower house of parliament on December 9, 2016.

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India to Start Screening Imported Telecom Components from April 2017

India will start screening imported components for telecom network equipment and handsets from April 2017 due to security concerns. The move was previously held off numerous times in the last four years as the EU and US opposed to local checks fearing bottlenecks in the supply chain as well as increased costs to manufacturers.

The inspections of the imported components will be carried out by the state-owned quality control agency, Standardisation Testing and Quality Certification, which is part of the Ministry of Electronics and IT. In order to maintain supply chain efficiency, the government will screen those products that are deemed most vulnerable, such as core network systems, base stations, mobile switching centers, network management and billing systems, and transmission devices.

India imports nearly US$ 9 billion worth of telecom equipment, which can be overwhelming for one agency to handle. Consequently, the government plans to involve private sector companies to establish their own labs for local screening. In time, these labs could develop into a strong testing ecosystem. Nevertheless, private companies are not keen on this proposition due to the high costs involved, stipulated to be around US$ 200 million (Rs 14 billion). Also discouraging is the lack of any government funding.

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