What is Countervailing Duty

Countervailing Duty

What is Countervailing Duty
What is Countervailing Duty
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 subsidy to their producers. To avoid flooding of the market in the importing country with these goods, the government of the importing country imposes countervailing duty, charging a specific amount on import of such goods.
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.
The duty 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.
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 levy of anti-dumping duty is both exporter-specific and country-specific. It extends to the imports from only that country in respect of which dumping has been alleged and the complaint has been filed and duty recommended. Such duty does not apply to imports from other countries in respect of which the domestic industry has not alleged dumping.
Who imposes countervailing measures in India?
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. While the department of commerce recommends anti-dumping duty, provisional or final, it is the department of revenue in the finance ministry that acts upon the recommendation within three months and imposes such duties.

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