Confusion looms over GST impact

It has been a year since the Indian government started implementing the Goods and Services Tax (GST), a uniform tax slab, which was expected to have significant impact on the Bhutanese economy.

However, prices at the retail level have not changed much except for a few goods and services. Experts are of the opinion that while the final consumers have reaped the benefits, others feel that prices post GST regime have remained unaffected.

GST on export to Bhutan is supposed to be exempted and prices were expected to fall. However, according to some grocery stockists in Phuentsholing, despite the waiving of taxes, prices have not yet changed except for a few commodities. The Bhutan Sales Tax (BST) for the commodities entering Bhutan has compelled the prices to remain same without fall. Earlier, the Indian government used to refund Excise duty and Value Added Tax (VAT) and other taxes for Bhutan-bound goods. Since, GST is not included in these goods, now the Bhutanese government does not receive the refund.

For the Indian government, some experts say that Bhutanese market is considered a local market therefore impact has been minimal. The manufacturer decides the retail price of the goods after deducting the GST and the profit margin for the wholesale and retail dealers. “If everything is done as per rule, the consumers should get the benefit. The prices should have become cheaper as per theory,” said Anup Gupta, a finance manager in Zimdra Automobiles.  Excisable product has become cheaper as it was chargable by the Indian government. Since the excise duty is now subsumed within GST, the prices were expected to fall.

Since Bhutan imports two types of goods, consumable and raw materials for value addition, raw materials should be cheaper. The only tax passed on to the consumer of raw materials is excise duty while the other taxes fall under GST and cannot be charged. For consumer goods, until the manufacturer revises the retail price, the prices are expected to remain the same. “In most cases, MRP has not been revised except for some products for consumers,” Anup said.

However, some say that consumers are benefitted as the retail price of goods has decreased. The intermediary dealers’ margins have not been impacted. “We get the set margin but the fall in prices means the consumers are benefitted,” said a retail store owner, Narendra Sharma. The prices are determined by the level of GST imposed on the particular goods. The production cost of some products has decreased which resulted in the prices. But the prices are almost similar to that of the Indian market. “Indians do not treat export of goods entering Bhutan as export. Beacause they have to pack differently for the export quality,” he said.

Meanwhile, the price will not impact the BST if the deal is directly cut by the manufacturer. But for the consumers buying from the middleman dealers, the price is expected to fluctuate as they have to bear the sales tax. “For Bhutan, nothing has changed as the product cost has not come down. The manufacturer has not reduced the retail prices,” said Anup Gupta.

Another stockist in Phuenstholing said that except for a few commodities, the prices have remained almost the same. “The prices of commodities which we bought directly from the manufacturer have decreased,” said BB Gurung, Manager of 8Eleven.

Meanwhile for exports, the hassle at the customs gate is the only challenge faced by exporters and importers. Since the GST has to be filed by the importers at source, it takes time for the importers to receive the refund. Earlier, due to free trade, the export to India was easier.

Some stockists say that despite waiving GST for Bhutan-bound commodities, the prices have not changed except for a few. “Still, there is confusion over the impact of GST. Without having to refund the excise duty, the government is losing I think as the price has not changed much,” said Gyembo, a grocery stockist in Phuenstholing. The prices of some goods have in fact increased. Bhutan government imposes upto 10 to 30% BST on the goods. Up to 18% GST is imposed on goods and services in India.

An Indian superstockist based in Siliguri said that due to hassles in filing GST and claiming refund, export from India has been discouraged. “Still there is no online entry checkpoint except in Phuenstholing. It causes inconveniences,” said Sandeep Jain.

The benefit will be visible only when the computing system of both the countries work parallely,” he further said. He said that the Indian importers have a huge pending amount to receive as refund on GST.

Also the importers have faced monetary impact having to pay at the entry point.

Krishna Ghalley from Phuentsholing