Article XVI of the GATT 1994 and the Agreement on Subsidies and Countervailing Measures (ASCM) deal with the regulation of subsidies and the use of countervailing measures to offset the injury caused by subsidised imports. Pursuant to the ASCM, a subsidy is deemed to exist if there is a financial contribution by a government or any public body within the territory of a member or there is a form of price support and a benefit is thereby conferred. 

In India, countervailing actions are governed by Sections 9, 9B and 9C of the Act. In 1995, the Customs Tariff (Identification, Assessment and Collection of Countervailing Duty on Subsidised Articles and for Determination of Injury) Rules 1995 (the Countervailing Rules) were enacted to determine the manner in which the subsidised articles liable for countervailing duty are to be identified, the manner in which subsidy provided is to be determined and the manner in which the duty is to be collected and assessed under the Act.

As with anti-dumping, the DA conducts countervailing investigations and recommends duties pursuant to the provisions given under the Act and the Countervailing Rules. The responsibility for the imposition and collection of duties as recommended by the DA lies with the Ministry of Finance.

Indian law on countervailing measures is similar to the ASCM and provides that where any country or territory pays or bestows (directly or indirectly) any subsidy36 upon the manufacture or production therein or the exportation therefrom of articles of any kind, including any subsidy on transportation of the articles, then, upon the importation of such articles into India, whether imported directly from the country of manufacture, production or otherwise, and whether imported in the same condition as when exported from the country of manufacture or production or changed in condition by manufacture, production or otherwise, the central government may, by notification in the Official Gazette, impose a countervailing duty not exceeding the amount of the subsidy. 

The DA in determining the subsidy shall ascertain whether it:

a.    relates to export performance;

b.    relates to the use of domestic goods over imported goods in the export article; or

c.    has been conferred on a limited number of persons engaged in manufacturing, producing or exporting the article unless the subsidy is for:

 

•    research activities conducted by or on behalf of persons engaged in the manufacture, production or export;

•    assistance to disadvantaged regions within the territory of the exporting country; or

•    assistance to promote adaptation of existing facilities to new environmental requirements. 

As with anti-dumping practices, the DA is required to assess and accord a finding that the import of a subsidised article into India causes or threatens to cause material injury to the domestic industry. The principles for the determination of injury are set out in Rule 13 read with Annexure I of the Countervailing Rules. Rule 12 read with Annexure IV of the Countervailing Rules provides for the calculation of the amount of countervailable subsidies. However, in a scenario where an article subject to countervailing duty already attracts an anti-dumping duty, a countervailing duty for the amount equivalent to the difference between the quantum of countervailing duty and the anti-dumping duty payable may be imposed by the government.

The countervailing duty ceases to have effect on the expiry of five years from the date of its imposition, unless revoked earlier. However, if the central government, in a review, is of the opinion that the cessation of the duty is likely to lead to continuation or recurrence of subsidisation and injury, it may, from time to time, extend the period of imposition for a further five years. An appeal against the order of determination or DA review regarding the existence, degree and effect of subsidy in relation to the import of any article is made to CESTAT.