Revenue Policy Affecting Business in Border Areas

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Revenue Policy Affecting Business in Border Areas

December 10: Traders in the border town of Birgunj are disappointed due to lack of business even during the recently held festive season. Deepak Sarraf, a businessman from Maisthanchowk, was expecting that his business would increase during festivals like Dashain, Tihar and Chhath. However, he was disappointed as customers did not come to his shop as expected.

Traders who were worried due to lack of business amid economic recession were hopeful that they would get some relief during the festive season. However, traders like Sarraf are worried what to do next as their business did not go well even during the major festivals.

While the businessmen of Birgunj spend the day waiting for customers in vain, the Indian city of Raxaul across the border is crowded with Nepali customers.

Rajendra Gupta, a businessman in the area said, “During the festival, it is difficult to even set foot in Raxaul due to the crowd of Nepali customers. At other times as well, majority of customers shopping across border are from Nepal.”

In the year 2007, the government introduced a rule requiring importers to pay customs duty on goods worth more than Rs 100. However, this rule is yet to be implemented.

Customers from Birgunj shopping across the border in the Indian market is not the only problem. Another major problem is the flourishing business of illegally smuggled goods into Nepal as the goods are easily available across the border.

Traders claim that the smuggled goods, which are imported by evading customs duty, reach the main cities of the country including Kathmandu. The government has deployed customs officials, security forces and revenue investigation agencies at the border to control illegal imports. However, smuggling of goods continues unabated.

 Traders complain that smuggling has flourished due to the collusion of those agencies. A trader said, “The empire of illegal imports is becoming so strong that it has become a challenge for domestically-produced goods.” A study conducted by Nepal Rastra Bank a few years ago revealed that about 35 percent of the total imports from India is brought through informal channels. 

Businessman Gupta says that when goods are imported through illegal means, there is an adverse effect on trade, production and all aspects related to it in the country.

 According to experts, Nepali customers are attracted to the Indian market because the goods are cheaper there after India's reforms in the tax system through the goods and services tax.

They claim that the problem of smuggling will not be controlled until the government improves the revenue system because this is also the cause of the illegal import that is happening institutionally. India imposes less tax on consumer goods and more on luxury goods.

Ashok Kumar Temani, president of Madhesh Province chapter of FNCCI said, “When the prices of common consumable goods are low there, they are imported illegally. We have a high rate of revenue for the import of those goods. This has led to the problem of smuggling.” 

Temani claims that if the total revenue collected in Nepal's customs is made equal to the goods and services tax in India, this problem will be solved automatically. India does not levy GST on exports to Nepal.


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