Kathmandu, July 1

Despite knowing that India was rolling out the goods and service tax from today, Nepali  traders are just waking up to the fact that it could also affect them as Nepal is heavily dependent on the southern neighbour for most of its trade.

With the enforcement of GST in India, clearing companies of Nepal-bound cargoes have said they may have to raise their service charges if the tax administration does not allow them to differentiate their income between transit cargo and other cargoes, according to Rajan Sharma, former president of Nepal Freight Forwarders’ Association. “As Indian companies work as custodians of Nepal-bound cargo on behalf of consignees and provide transshipment facilities for export cargoes, Nepali traders could have to pay more for services.”

According to Sharma, even the Consul General’s Office in Kolkata cannot provide proper information to traders regarding probable implications of the GST. “While importers are not too concerned, it is the end consumers who will wind up paying the additional cost that is passed on to them.”

One glimmer of hope is that the government of India has said there is zero duty on exporters of goods or services. The GST paid for any movement of goods for the purpose of export can be reimbursed to exporters. “If the government of India allows reimbursement to service providers in transit cargo, GST will not affect us,” said Commerce Secretary Naindra Prasad Upadhyay.

However, the commerce ministry is also not clear about the reimbursement system under GST for service providers of transit cargo.

Traders said the government of India has to provide equal treatment for export of goods and services. “The Indian government has clearly said zero taxes on export of goods, so, service providers should be given the same treatment as they are exporting services,” reasoned Pashupati Murarka, immediate past president of the Federation of Nepalese Chambers of Commerce and Industry.

According to Murarka, service charges of clearing agents of Nepal-bound cargoes may rise by three percentage points from the current service tax of 15 per cent and rail service charge might go up by 0.5 percentage point from existing 4.5 per cent after the implementation of GST.

“The government should immediately talk with the government of India to sort out this matter,” said Murarka.

Sharma blamed the lax attitude of the government, private sector umbrella bodies and other concerned stakeholders for the confusion and informed that the country had recently faced loss of millions of rupees due to lack of proper information.

Since January, the government of India has imposed 4.5 per cent service charge on ocean freight cost of shipping liners for the cargoes imported in India. The consignees of Nepal-bound cargoes had also paid the charges for four months before the Indian government finally clarified that the service charge was not applicable for transit cargoes, according to Sharma. “Proactive role of the government and private sector umbrella bodies is required to prevent such a situation.”