India exploring options after WTO panel ruling, rules out immediate impact

The commerce department on Tuesday said that India is taking ‘necessary steps’ and ‘exploring options’ in the light of its World Trade Organization (WTO) rights and obligations with respect to the IT tariff dispute with European Union (EU), Japan and Chinese Taipei.

It further said that the WTO panel ruling – India’s imposition of tariffs on electronic items violates its commitment under the Information Technology Act (ITA) under the multilateral trade body – will not have any ‘immediate impact’ on IT products.

In 2019, the three nations had alleged that India violated provisions of the General Agreement on Tariffs and Trade 1994 (GATT 1994) and imposed duties on certain information and communication technology (ICT) products. The dispute settlement panel issued its final report to all WTO members last week.

The statement comes a day after Business Standard reported quoting an EU spokesperson that EU may impose retaliatory tariffs on Indian goods if New Delhi doesn’t abide by the WTO ruling.

According to the complainants, India has applied duty on imports of certain ICT products such as mobile phones, mobile phone components and accessories and line telephone handsets, of up to 20 per cent. This, they said, is more than the bound rate of 0 per cent. Bound rate is the maximum tariff that can be imposed by an importing country.

India, however, has argued that its measure of levying duty against the products is legally valid. This, it said, is because these products do not fall under the ambit of Information Technology Agreement-1 (ITA-1) to which India is a signatory.

According to data compiled by the commerce department, the EU’s share of total imports of such ICT products into India during calendar year 2022 was at 3.03 per cent, estimated at $550 million. Japan’s and Chinese Taipei’s share were at 0.33 per cent, estimated at $24 million and 2.86 per cent, estimated at $235 million, respectively, according to the statement.

Moreover, India has brought its duty rates to 0 per cent with respect to two of the contested products — headphones/ earphones and electric convertors — since February last year.

A commerce ministry official had last week told Business Standard that since the appellate body of WTO is dysfunctional due to lack of judges, the adverse report of the dispute settlement panel won’t have any immediate impact.

“India would be appealing against this judgment. But since the appellate body at the WTO is dysfunctional, it will be an appeal in void. That’s why there will not be any substantial impact on India,” a government official had said.