Commodity prices increases with revised tax

People had rushed to shops and the duty free outlet to buy things

Business owners in Thimphu had practically no time to even rest and have lunch as people thronged their shops on November 8, 2022. Scores of people had also reached the duty free shop.

 It was not because of words about another lock-down. It was the impact of an earlier notification from the Ministry of Finance (MoF), which stated that in exercise of the power conferred under section 46(B) of the Public Finance (Amendment) Act of Bhutan 2012, “the MoF would like to inform the general public that the revised custom duty rate, sales tax and green tax rate shall be applicable on import or sales made on or after November 8, 2022.”

Further, though the government has not imposed taxes on essentials like rice, inflation in India, has led to the increase in rates of these commodities. 

As many expected, the revised Customs Duty (CD) tax, Sales Tax (ST) and Green Tax (GT) rate, has led to an increase in prices of commodities. For instance, the price of Koka noodle which was earlier Nu 25-30 per packet has increased to Nu 35.

“The cost of can beer, which was earlier Nu 240 to Nu 260 per one set (4 bottles) has increased to Nu 350,” a businessman from Phuentsholing said. “Similarly, the rates of most juices have increased by Nu 10 to Nu 15 per bottle,” he added.

Tenzin, a house wife said she went shopping and found that rates have increased. “Biscuits now cost about Nu 5 more per packet. People may say that the hike is not much, but when we buy about 10 packets of biscuits, we now need to pay Nu 50 more. There are other examples, too,” she added. When asked if she has calculated by how much the costs of her weekly shopping would increase, she said it would definitely increase by about Nu 450.

“This means an increase in expenses by about Nu 2,000 per month,” she said, adding she will now need to reduce her expenses.   

 Sonam, 28, who works in one of the private sectors in the capital said that the price of grocery items, in particular, the price of a 25kg of rice cost around Nu 1,250 now, while the cost was Nu 1,080 before.

“The price of the rice has increased and as a customer I don’t have much option to argue but then to buy the commodities,” Sonam said, adding that though it is not the impact of the revised taxes, inflation in India, affects the people.

The most hit currently are tobacco consumers. “A packet of cigarettes now cost around Nu 190. The earlier rate was between Nu 90 to Nu 120,” a tobacco consumer said.

Meanwhile, whole sale shops in Thimphu, who still have stocks imported before November 8, say they have not increased rates for the old stocks. “The new rates will apply on goods imported after November 8,” one wholesaler said.

While some people complained that the new rates were imposed even before November 8 and on goods imported before, the Office of the Consumer Protection (OCP) said they have not received any complains from the people.

“We didn’t receive any complain as of now and we also don’t know if the price hike is happening because of the revised tax rates. But, if people complain, we will intervene,” he said. 

Meanwhile, the tax bill of 2022 was presented to the economic and finance committee of the parliament on November 9, 2022 by the Ministry of Finance (MoF). The bill is intended to ease the shortage of foreign currency reserves while promoting the local priority sector, which has import substitution potential, and it will encompass amendments to CD, ST and GT rates.

The broad areas of proposed tax revision are essential items, agriculture inputs, domestically available products, those harmful to the environment, products harmful to health, vehicles, and precious metals.

Similarly, the MoF has revised the custom duty rate, sales tax and green tax rate on import, sales and automobile dealers including heavy machinery, heavy vehicle dealers and two wheelers.

For instance, the revised tax rate includes 10% CD and 100% ST for tobacco products.

Similarly, 10% CD and 30% ST are imposed on commodities like juice products, chips with all kinds and 10% CD and 20% ST on biscuits, pasta and bread and the proposed rates for the vehicles were revised as per the cylinder capacity of the vehicle. Taxes for essentials like rice, oil and others have not changed. However, CD of 10 % levied on edible oil has been removed.      

Meanwhile, the notification from MoF stated, “In exercise of the power conferred under section 46(B) of the Public Finance (Amendment) Act of Bhutan 2012, the Ministry of Finance (MoF) would like to inform the general public that the revised custom duty rate, sales tax and green tax rate shall be applicable on import or sales made on or after 8th November, 2022.”  

Further, the notification stated that all the automobile dealers including heavy machinery/heavy vehicle dealers and two wheelers that the sales tax at point of sale (PoS) should be collected and deposited at the revised rate for sales made on or after 8th November, 2022.

Sherab Dorji from Thimphu