Buying from foreign ecommerce sites may get costlier

MUMBAI: The government may consider introducing a prepaid tax and customs model for cross-border transactions, a move that could make buying products from foreign ecommerce platforms costlier.

Chinese and other foreign ecommerce platforms, while shipping products to Indian customers, would have to pay the tax and customs duty through a government IT system and can only then have the goods delivered.

The prepaid customs and IGST (integrated goods and services tax) model would mean that buying products from foreign websites could become costlier by around 50%. The government has sought recommendations from stakeholders.

Crackdown last year
The government wants to introduce a system under which customs could open its own payment interface so a payment gateway service provider or ecommerce platform can integrate with it. The service provider, like the foreign ecommerce platforms, would be required to submit transaction details, deposit prepaid duties and receive a receipt and transaction reference number in return.

“The issue of misuse of India’s postal gift channels for commercial transactions by multiple foreign ecommerce platforms leads to loss for domestic ecommerce platforms. Creating a prepaid model will create increased transparency for consumers and foreign suppliers, ensure that the packages do not get held up at ports and at the same time help minimise evasion of customs duty and IGST,” said Sachin Taparia, chairman of LocalCircles, a social media platform. The government had sought recommendations from LocalCircles on how to tackle the issue.

Last year, India had started a major crackdown on the online purchases of goods from Chinese ecommerce platforms that were escaping customs duty and GST.


Several Chinese ecommerce websites were shipping products to India, claiming they were gifts to evade levies and circumventing local laws. Any genuine gifts received by Indians of up to Rs 5,000 value don’t attract taxes.

In 2019, such transactions came under the scanner of the customs department that led to a drop of about 60% in the sale of such products in the country. The Mumbai customs then imposed a ban on shipments coming through the gift route, cutting down on such shipments by almost 60%. India also amended its Foreign Trade Policy to ban all packages coming into India from ecommerce sites through the gift route, except life-saving medicines and rakhis.

According to the recommendations, ecommerce platforms will be required to collect taxes from customers and pay the government through the interface. The second option would be the Indian entity or partner of the foreign ecommerce platform depositing the required taxes.

While taxes are levied on goods purchased from ecommerce platforms that have a presence in India such as Flipkart or Amazon, goods bought from websites based overseas escape taxes and customs duties. The same goods are cheaper by around 40% when bought from a foreign website, avoiding levies that could add up to 50% on such items.