Countervailing duty (CVD) is a type of import duty which a government imposes on the imports to protect it’s domestic producers from the negative impact of subsidies being given by the exporting country to their exporters or producers. CVD is thus an import tax by the importing country on imported products to counterbalance undue subsidies.
Foreign governments many times provide subsidies to their producers to make their products cheaper and boost their demand in other countries. But this approach to promote self exports affects the other countries own domestic production as it falls and also domestic market gets flooded with imported goods. To avoid this flooding, 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 the exporting country .
On the imposition of the CVD, the imported products become costlier in the markets of imported country and hence goods of domestic producers are also in demand due to narrow price difference between them.
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.
In India the CVD has been subsumed under the GST regime as Integrated GST or IGST which is imposed on imports in addition to the import duty.
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.
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