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Tackling illicit trade fundamental for safeguarding India's economic stability, ensuring fair competition and ease of doing business: Chairman, CBIC

Sep 28, 2023

  • Government actively exploring advanced tech for risk management and compliance; firms up co-operation on cross border smuggling
  • Every component of ‘Gati Shakti’ in logistics chain is important and to be closely monitored
  • CBIC committed to bring down logistics cost to the level of 8 per cent of GDP
  • India sees marked improvement in Global Terrorism Index says FICCI CASCADE’s report, titled ‘Hidden Stream: Linkages between illicit markets, financial flows, organised crime and terrorism’; Scaling of multi-dimensional efforts can save India $159 billion to money laundering
  • Report highlights that Money laundering accounts for 2-5 percent of global GDP, according to UN estimates

NEW DELHI, 28th September 2023: Mr. Sanjay Kumar Agarwal, Chairman, Central Board of Indirect Taxes and Customs (CBIC) today said that when India is rising as a global force in international trade and when our interconnectedness has transcended geographical boundaries, the challenge of illicit trade looms larger than ever before.

Addressing the inaugural of the two-day 9th edition of ‘MASCRADE 2023’, organized by FICCI CASCADE, Mr. Agarwal said, “Illicit trade undermines national security, risks legitimate manufacturing, leaks government revenue, jeopardizes public health and safety, and erodes the trust of consumers and investors alike. Tackling this issue is fundamental for safeguarding India's economic stability, ensuring fair competition, and fostering an environment conducive to sustainable growth and ease of doing business. CBIC plays a crucial role in the fight against illicit trade in its entirety,” he added.

Speaking on the rising figures of GST revenue, Mr. Agarwal said that month after month the GST revenue has crossed the mark of Rs 1.6 lakh crores. The GST revenue collection was Rs 1.87 lakh crores in April this year, the highest ever. The buoyancy of revenue collection is 1.43 of nominal GDP growth, meaning thereby that growth in revenue collection is not only by GDP growth, but a major contribution is made by increased compliance levels. He further stated that the government is taking all steps to encourage self-compliance. “An environment is being created so that the fraudsters are not allowed to enter in the ecosystem and pollute it. The recent decisions taken in successive GST Council meetings, to make the suitable changes in return filing are in that direction only, so that menace of fake ITC is curbed,” he added.

To enhance the compliance, Mr. Agarwal said that the department has taken steps from soft approach of nudging the taxpayers for timely and accurate filing of returns, to selecting for return scrutiny or Audit.

Speaking on the Customs, Mr. Agarwal said that the department is fully committed in the country’s efforts to bring down the logistics cost from level of 13-14 per cent of GDP to the level of 8 per cent in line with such levels in developed world. “For success of ‘Gati Shakti’ program, each and every component in logistics chain is important and need to be closely monitored. Customs is leaving no stone unturned,” he emphasized.

On anti-smuggling front, Mr. Agarwal stated that whether it is a case of outright smuggling or by concealment in trade consignments, customs officers are keeping a vigilant eye over the perpetrators and syndicates involved in such illegal activities. “CBIC is also actively exploring to harness cutting-edge technologies to enhance its operations, including Big Data Analytics, AI, Image Analytics, Natural Language Understanding, Network Analytics, and Open-Source Intelligence in the realm of Customs and GST. Such initiatives are leveraging innovative technology to manage risks and ensure compliance,” he added.

Dr. Kunio Mikuriya, Secretary General, World Customs Organization said that to combat these threats and smuggling risks, customs administrations need to prioritize risk management and profiling based on timely and accurate information, intelligence exchange and analysis, including advance cargo and passenger information. “Customs agencies must strengthen their cooperation with e-commerce platforms and intermediaries to ensure responsible and compliant trade practices, thereby preventing adverse effects on governments, consumer protection, and conventional consumer retailers,” he added.

Mr. Anil Rajput, Chairman, FICCI CASCADE said, “In recent time our Honourable Prime Minister has been emphasizing on the need to eliminate the streams of terror funding in order to protect our communities and economies. In line with this thought, the theme of MASCRADE this year has been inspired in the context of our war against terror financing. It is indeed heartening to see that the Government of India has accorded top priority to this. Purposeful interventions such as establishing the world's first National Forensic Science University; developing national and global databases on crimes such as terrorism, narcotics, and economic offenses; creation of the Indian Cybercrime Coordination Center among others have been made.

“Clearly, the fight against terror funding and illicit trade are beyond any country, region or industry. A collective partnership of all compliant nations with the aim of promoting legal industry across the world, punishing the illicit traders and choking the flow of finance for terror funding is imperative. Additionally, internal security is a critical pivot for the nation’s prosperity. Afterall, when a country can ensure the safety and wellbeing of its citizens, it paves the way for economic growth, development and an improved quality of life,” he added.

Mr. Anil Sinha, Former Director, CBI and Think Tank Member, FICCI CASCADE said that we need to collectively strategize against the activities of illicit trade. This is the time of action and we must move in this direction,” he added.

During the event, FICCI CASCADE-TARI report ‘Illicit Markets: ‘Hidden Stream: Linkages between illicit markets, financial flows, organised crime and terrorism’ was released. The first-of-a-kind report examines intricacies in various forms of illicit operations and highlights the intricate nexus between the illegal economy, terror and organised crime.

Highlights of the report:

India is one of the fastest growing nations in the world and the nation is also displaying good progress in addressing security concerns, as evidenced by its improved scores in the Global Terrorism Index (GTI) and crime index. The report notes that India has a GTI score of 7.43 and a crime index score of 44.7, reflecting positive developments in these areas compared to the levels observed in 2016. This is evident through the decrease in both terror incidents and fatalities from 2016 to 2020, as well as the recent reduction in crime cases. The Global Organised Crime Index (2021) shows a low prevalence of organised crime actors in India at 4.3 on a scale of 1–10, compared to the average benchmark of 5.2 for 122 countries. India also does not have a high propensity to export counterfeited products, according to the Global Counterfeiting Index.

The 6 Cs approach will help India safeguard itself against the ill-effects of illicit financial flows and remove barriers to economic growth. The Indian economy crossed the $3 trillion economy mark in 2021 with the total amount of money laundering in India as per UNODC estimates pegged at $159 billion, showing the magnitude of the problem driven by the rise of illicit markets and non-market actors. As India strives to transform its economy into a $5 trillion powerhouse in the coming years, the current trade composition at 30 percent would make the trade value at $1.5 trillion.    

The report recommends adopting 6 Cs as a policy playbook to negate the threats. 

  • Cognisance of Terrorism and Organised Crime Under Regulatory Framework
  • Continuous and Critical Evaluation of Illicit Financial Flows
  • Central Nodal Agency for Greater Coordination
  • Creating Awareness and Changing Consumer Preferences 
  • Combatting Trade Based Money Laundering 
  • Cooperation and Coordination at International Level 

The report also investigates the hidden linkages in 122 countries and decodes the relationship between organised crime actors and the illegal economy, including trade-based money laundering, counterfeiting, arms and drug trafficking and terrorism and crime. It is a first-of-a-kind report that sheds light on the intricate nexus between the illegal economy, terror and organised crime. The report also provides linkages and empirical relationships based on data gathered.

The report relies on secondary data sources and indicators from international and other agencies on terror and crime, such as the Global Terror Index (GTI), Crime Index and Global Organised Crime Index (GOCI) to understand the subject across 122 countries. Organisation of Economic Cooperation and Development (OECD) indicators on counterfeiting, Global Financial Integrity (GFI) indicators on Illicit Financial Flows and other governance indicators provided by the World Bank were used to establish linkages and relationships.

In 2021, the economic impact of violence was estimated at $1.17 trillion, which accounts for approximately 6 percent of the country's GDP in terms of purchasing power parity (PPP) and violence per capita impact is estimated at $ 841 at PPP. It is estimated that nearly 80 percent of such containment costs relate to security and as the economy grows (along with it the illegal economy), India’s cost of addressing terror and crime will be significant. The report highlights the role played by criminal networks in a number of illicit activities, including drug and human trafficking, smuggling of cigarettes, alcohol and illegal trade of wildlife products. The United Nations estimates that the global amount of money laundered in a year is estimated to range from 2 to 5 percent of the global GDP.

The complex challenges posed by crime and terrorism have emerged as a critical global concern. India's growing global trade prominence raises the risk of trade-based illicit financial flows, potentially affecting economic progress and supporting terrorism and criminal activities. To counter these risks, India should adopt a comprehensive approach addressing illegal markets, terrorism, and organised crime, tailored to its unique circumstances and challenges.

Under the leadership of our Hon'ble Prime Minister, Shri Narendra Modi, India is committed to work with all countries to combat terror financing in all its forms. The government has taken several pro-actives measures to choke the flow of funds by nefarious entities. Strict enforcement measures have been put in place with the Directorate of Revenue Intelligence identifying 437 instances of duty evasion totalling Rs 3,924 crore, a 40 percent increase from Rs. 2810 crore in 2020-21.


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