Assured a high level delegation from India
The Indian government is undertaking a project to enhance and install infrastructures related to trade and customs along the northeast frontier including trading points with Bhutan.
The commissioner of GST, who is behind the GST legislation and policy, Upender Gupta is in the country leading a high-level delegation to clarify the issues with regard to the goods and services tax (GST). The delegation met representatives of the private sector yesterday in Thimphu.
Members from the private sector said the introduction of GST has a serious impact on trade between the two countries.
Chairman of Zimdra Pvt. Ltd, Ugen Tshechup Dorji said Bhutan is worst hit among the countries in the region. “The impact is not much in other countries in the region as they have multiple trading partners. Bhutan has only one trading partner,” he said.
Indian exports to Bhutan are zero-rated and with this principle, he said that there should be price advantage for Bhutan on imported goods and services. “But only prices of vehicles have gone down,” he said. In case of fast moving consumer goods (FMCG), which are basically packaged consumer goods, he said save for one or two items, the prices have remained the same.
For agricultural goods export bound to India, he said even after clearing the GST, trucks are held up at the border for two weeks because customs do not accept BARFA certification. Products are then sent to Kolkata for testing. Similarly, for goods flowing into Bhutan, he said it takes a week to clear all procedures.
He also highlighted issues on GST imposition on products coming from third countries.
A businessman, Singye Dorji, said that because of the GST and the procedures involved, more non-tariff barriers have emerged. “It is more easier to do business with Bangladesh than India now despite the existence of a free trade agreement,” he said.
While the GST has created a level playing field between Indian and Bhutanese manufacturers, he said manpower, transportation and reliance on India for raw materials have affected the competitiveness of Bhutanese industries.
In the earlier regime, Bhutanese good enjoyed a direct tax benefit of at least 14 percent from the excise duty, which was exempted. Indian goods circulated within India attracted 17 different state and central taxes. GST has subsumed all these taxes including excise duty.
For example, Bhutanese goods are now levied IGST (integrated GST) on entry to India. Should a good from Assam be exported to West Bengal, the same rate of IGST is levied. Now, if a product from West Bengal is sold within the state, the Central and State (CGST and SGST) is imposed. But the total value of CGST and SGST combined is equivalent to IGST.
The chief executive officer of ice beverages in Samtse, Thuji Yonten said the company was built on the model of the earlier tax regime. Seven months into operation, he said there was an overnight increase in taxes from 14 percent to 40 percent, resulting in sales plunging by 72 percent.
For a single truckload of consignment, he said the company has to fill a form and take it to Chumarchi customs station, West Bengal. After it is approved, the company has to deposit the tax in the State Bank of India in Siliguri and bring it back to the customs station.
Similarly, the Dungsam Cement poured its grievance on the outpost in Assam border, which is done manually. The Army Welfare Project also lost its market in North East India because of GST confusion.
Clarification from GST commissioner
“We have heard all of you and we will look into the matter and make trade as free as possible,” Upender Gupta said. “Trade with Bhutan is significant and we are very much concerned. Bhutan has a special place in our hearts.”
He said the central authority would urgently discuss with all the tax commissions in North East, Guwahati and Siliguri to clear the issues urgently.
“As far as GST is concerned, there is no change in process from the earlier regime. But on the ground, there are complications,” he said.
Indian exports to Bhutan, he said it is zero-rated and that the Indian trader will get input tax credit or refund for the IGST. The Indian delegates are aware that some Indian traders are passing the GST to Bhutanese importers. This, the Indian officials said should not happen. “Even goods imported from third countries resold to Bhutan are considered as export and should not attract GST,” the commissioner said.
An exporter also raised concerns on Indian traders asking GST registration number from Bhutanese firms. “This is something not in accordance with the law. Bhutan is an independent sovereign country and GST is an Indian law,” Upender Gupta said.
Director general of revenue and customs department, Yonten Namgyel said the government has requested the high-level delegation to clarify issues with both the government and private sector. He said that Indian counterparts have been considerate to Bhutan and available to clarify issues anytime.
Tshering Dorji