Indian rice exporters are grappling with significant tax demands from the customs department, posing a threat to rice shipments from India, according to information shared by four exporters with Reuters. The customs department has issued notices to exporters requesting payment of duty differentials on rice exported over the past 18 months, a rare tax demand that could severely impact rice trade from India. As the world’s largest rice exporter, India implemented a 20% export duty on white rice in September 2022, followed by a similar duty on parboiled rice in August 2023 to stabilize domestic rice prices in anticipation of crucial state and national elections in 2024.
Exporters were initially paying a 20% duty based on the Free on Board (FOB) value of rice; however, the customs department now requires them to consider the transaction value and settle any resulting duty discrepancies. The new duty demand poses financial challenges for exporters, potentially jeopardizing their ability to continue operations. The industry estimates the additional duty cost to be approximately $15 per metric ton, totaling around 15 billion rupees.
The Rice Exporters Association intends to engage with the government to address the impracticality of the current duty demand and propose a flat duty structure for future exports to prevent similar issues. Given the thin profit margins in the rice export business, exporters are considering legal action instead of complying with the unexpected tax burden. India primarily exports non-basmati rice to countries like China, Bangladesh, and various African nations, highlighting the significance of resolving the tax issue to sustain trade relationships and market competitiveness.