Countervailing duty (CVD)

Countervailing duty (CVD)

Context

The government has decided not to impose countervailing duty on certain aluminium products being imported from Malaysia, as the finance ministry has not accepted the recommendations of the directorate general of trade remedies (DGTR).

Concept:

Countervailing duty (CVD):

Countervailing duty (CVD) is a specific form of duty that the government imposes in order to protect domestic producers by countering the negative impact of import subsidies. CVD is thus an import tax by the importing country on imported products.

To make their products cheaper and boost their demand in other countries, foreign governments sometimes provide subsidies to their producers. To avoid flooding of the market in the importing country with these goods, the government of the importing country imposes a countervailing duty, charging a specific amount on import of such goods.

How does it work?

The duty nullifies and eliminates the price advantage (low price) enjoyed by an imported product when it is given subsidies or exempted from domestic taxes in the country where they are manufactured.

It raises the price of the imported product, bringing it closer to its true market price. In this way, the government is able to provide a level playing field for domestic products.

CVD and India:

The World Trade Organization (WTO) permits the imposition of countervailing duty by its member countries. In India, the CVD is imposed as an additional duty besides customs on imported products when such products are given tax concession in the country of their origin.

The countervailing measures in India are administered by the Directorate General of Anti-dumping and Allied Duties (DGAD), in the commerce and industry ministry’s department of commerce.

Directorate General of Trade Remedies:

The Directorate General of Trade Remedies (earlier known as Directorate General of Anti-dumping and Allied Duties) was named in May 2018 as an integrated single window agency for providing a comprehensive and swift trade defence mechanism in India.

Earlier, the Directorate General of Anti-dumping and Allied Duties (DGAD) dealt with anti-dumping and CVD cases, Directorate General of Safeguards (DGS) dealt with safeguard measures and DGFT dealt with quantitative restriction (QR) safeguards. DGTR now deals with Anti-dumping, CVD and Safeguard measures

DGTR functions as an attached office of the Department of Commerce, Ministry of Commerce and Industry. It is a professionally integrated organisation with multi-spectrum skill sets emanating from officers drawn from different services and specialisations.