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Intelligence, revenue officials to investigate MIP on steel

The country’s revenue, intelligence and enforcement directorate officials will scrutinise all transactions to find out if there are any violations relating to imports under the Minimum Import Price (MIP) on steel following allegations of false invoicing and illegal transfer of funds to overseas accounts, official sources told The Hindu.

Authorities belonging to the Directorate of Revenue Intelligence (DRI), the Enforcement Directorate (ED) and the CBI will be involved in the probe and the government will most likely discontinue the restriction in August when the notification on the MIP on steel expires, they said.

The MIP is a form of quantitative restriction not seen as compliant with the World Trade Organisation norms, they said, adding that certain countries had some concerns regarding such measures.

On February 5, the government had imposed the MIP ranging from $341 to $752 per tonne on 173 steel products aimed at providing relief to the domestic steelmakers from “unfairly low priced” imports of the items. The Directorate General of Foreign Trade (DGFT) notification said MIP conditions were valid for six months from the date of the notification or until further orders, whichever is earlier. The DGFT said the landed unit cost of these items must not be below the specified MIP.

Elaborating on illegal money transfers, the sources said with international steel prices being considerably lower than the MIP, the authorities would probe whether there were instances of over-invoicing to “show” that the price of the imported item is equal to, or above, the MIP.

In transactions involving over-invoicing, where the actual sale price would be much lower, the authorities will probe if an amount equal to or greater than the MIP was paid (on paper) by the importer in India to the overseas supplier. The foreign supplier then would remit the difference amount (the difference between the actual sale price and the MIP) into an account held abroad by the Indian importer. The sources said transactions, including those related to the banking channels, will be investigated to find out if money is illegally parked abroad by Indian importers.

Also, in the past, following the imposition of an MIP on marble to shield the domestic industry, there were allegations that it had led to instances of over-invoicing and in turn unaccounted money being stashed away in tax havens. The revenue authorities and investigative agencies are looking into those alleged incidents, the sources said.

The Special Investigation Team (SIT) set up to probe black money, had among other things, suggested the doing away with the MIP on (items such as) marble saying it could otherwise result in money laundering activities. The SIT had suggested stringent action under the anti-money laundering law against foreign trade-linked money laundering activities.

To do away with such problems of illegal transactions, the government – during inter-ministerial discussions -- considered a proposal to impose measures such as ‘tariff valuation’ where instead of an MIP, a duty based on MIP could have been imposed on imports. However, it was argued that it would have meant imposing extremely high duties, which again could have led to disputes at the WTO, the sources said.

In a clarification to its notification, the DGFT said it “is not possible to import items (of steel) whose CIF (cost, insurance and freight) import price is below the stipulated MIP by paying custom duty on the MIP specified in the notification. The imported items must have a unit CIF value equal to or above the MIP.”

The MIP was also hurting the engineering sector. Exports from the sector were proving costly due to an increase in raw material cost of between six and 10 per cent.

Engineering goods exporters’ body EEPC India had asked the government to provide a compensatory mechanism for the micro, small and medium exporters (MSME) to make up for the increased raw material price. Though the government specified that the MIP will not be applicable on imports under the Advance Authorisation Scheme (AAS), EEPC India said the AAS was not used by the MSME sector and unless a price reimbursement mechanism is worked out.


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Printable version | Aug 8, 2022 3:54:31 am | https://www.thehindu.com/business/intelligence-revenue-officials-to-investigate-mip-on-steel/article8349034.ece