Medium-scale industries pummeled by losses


They have lost about 80% of their market constituting Indian clientele

Export-oriented medium scale industries in Phuentsholing are badly affected by the Goods and Services Tax (GST) imposed by the Indian government since July.

Exports have plummeted by almost 80% for three months now as the major  market had been India.

The industrialists say that only up to 20% of the products are faring well in the Bhutanese market. Most of these industries have been forced to halt exports worth millions.

Moreover, the new fiscal policy from the government since July scrapping exemptions on import duty has worsened the situation.

The 3% implementation of Bhutan Sales Tax (BST) including GST which ranges up to 28% has turned into a huge burden for the industries. The exemption was the only advantage that these industries had post-GST.

“We must have concessions from the government at least to thrive in the Indian market. Most of the products we supply are readily available in India so people do not want to undergo all the hassle that comes with buying from us. We are losing our market,” said Satyam Gurung, General Manager of Yarab Private Limited, which produces copper wire cables and plastic pipes.

Indian importers of Bhutanese goods are also shifting focus to Indian goods to skip the cumbersome GST-filing procedure at the Electronic Data Interchange (EDI) port.

Companies now have to forgo prices up to 28% to penetrate the Indian market.

Satyam Gurung said that companies are compelled to lower the price to more than 28% to gain an advantage over Indian products. Though Bhutanese products are sometimes of superior quality, few opt for them.

New companies producing soaps and potato chips are also starting to lose customers to Indian producers of similar products.

Sonam Yangchuk Private Limited, a perfume bottle producer, has halted exports worth around Nu 3mn since July.

Though the local market is thriving, exports which constitute around 85% of the market has been stalled, according to CEO of the company, Ugyen Samdrup.

Sale of the company’s product has dropped by six times against the pre-GST regime. “The company’s machineries are underutilized and we are on the verge of closure,” he said.

Now, importers have to make pre-payment before the products reach them. Companies also pay almost 40% as tax prior to export.

Imports of Drangchhu Beverages have also dropped by almost 70%. Sales tax which has been increased by up to 300% by the government has affected company sales.

Increase in BST has also impacted business in the local market.

“The government is supposedly negotiating with the Indian government and GST Council to facilitate our proposal. If it is not accepted, we are going to have an extremely difficult time,” said Karma Sacha, CEO of Drangchu Beverages.

Meanwhile, Association of Bhutanese Industries has written to the finance and economic affairs ministries requesting to raise taxes on the import of goods, which are manufactured in India to promote locally produced goods.

Krishna Ghalley from Phuentsholing