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India’s new tax regime hits Nepal exports

November 01
08:14 2017

Kathmandu, Oct 31 (IANS) Nepals exports to India has been adversely affected after the Indian government enforced the Goods and Services Tax (GST) this year, a media report said.

The GST is an indirect tax introduced in India on July 1 to make it one unified common market. It is a single tax on the supply of goods and services, right from the manufacturer to the consumer.

Export of major export items to India which were enjoying zero duty or nominal tariff earlier dropped significantly, according to a Nepal Rastra Bank report.

Export of juice, jute products, vegetables and fruits, processed food like biscuits and noodles and cardamom, among others, plunged heavily, the Himalayan Times reported.

Export of juice, which was a major export item to India in the previous years, plunged by 57 per cent in the first two months of current fiscal as compared to corresponding period of the previous fiscal year.

Nepal exported juice products worth Rs 344 million in first two months of the ongoing fiscal as compared to Rs 800 million in same period of previous fiscal, the report said.

Export of juice products to India was on the rise since last several years as the Indian multinational Dabur Nepal was the largest exporter of juice to India.

As per the central bank’s data, export of juice had surged by 50 per cent in the first two months of fiscal 2016-17 compared to the corresponding period of fiscal 2015-16.

The major reason behind the significant decline in export of juice was increased tariff to export to the Indian market.

According to exporters, they had to pay 12 per cent integrated goods and services tax (IGST) to export juice to India, compared to 6.18 per cent in the pre-GST regime.

They said the Indian market now has become 5.82 per cent costlier for juice exporters post GST implementation.

Likewise, export of large cardamom plunged by 45.3 per cent, fruits (85.9 per cent), vegetables (39 per cent), noodles (34 per cent) and jute goods (2.3 per cent) in the first two months of this fiscal as compared to the corresponding period of last fiscal.

There were high tariff differences in post- and pre-GST period in vegetables, processed food and other agriculture products, according to the bank report.

Shekhar Golchha, senior vice president of the Federation of Nepalese Chambers of Commerce and Industry, said Nepali goods have become less competitive in Indian market as they have to pay high duty in post-GST period.

“Nepali exporters should diversify their market in short-term and be competitive in longer-term to tap the huge market opportunity in India,” he said.

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