December 27: The Indian government is preparing to eliminate the indirect laws and implement Goods and Service Tax (GST) to improve the tax system. The GST which is said to be implemented from the coming fiscal year is expected to provide relief to the Nepali entrepreneurs.

The single rate GST which will alleviate all other indirect taxes is expected to ease the problems in economy of India as well as hurdles in the import and export of Nepal. According to the businessmen, this will lower the burden of taxes regarding the import from India and also reduce the transport cost during the imports from third countries. Upon the implementation of GST, the cost of raw materials as well as the finished products will decrease which will pull down the price of products in the market, say economists.

According to Shankar Prashad Koirala, tax analyst and Professor of Economics in Tribhuvan University said that the products can be imported without paying any extra taxes except the GST. "Though there are no import taxes, different types of taxes levied by the local governments have been forcing businessmen to pay dual taxes," he says.

Similarly, beside the transport expenditures, additional taxes levied in the name of service charges and entrance charges imposed by different states in India to the Nepal bound imports from third countries also contribute to the increase in costs of Nepali businesses. As per the VAT provisions in India, taxes paid by producers, retailers and traders across various phases are refundable. "However in many cases delay in VAT refunds with ill intentions of not returning the taxes results in refund of the taxes in last points increase the original cost of the goods," says a businessman.     

Shekhar Golchha, Vice-President of FNCCI also believes that implementation of GST will ease the problems in import export trade. "As GST will create uniformity in tax rates, we hope this will also help the industrialists as well as customers," Golchha says.   

Presently, different states in India have rights to implement the excise duty, VAT and indirect taxes. Due to this, various states and provinces in India have been implementing the excise duty, VAT and also other kind of taxes in the name of service charges. Because of this Nepali importers and exporters have tax burden almost two or three times more than the normal tax. Indian Premier Narendra Modi has also expressed that the implementation of GST will increase the trust between the central government and state governments.

Few days ago, the GST Council in India has fixed the tax rate on the purchase of goods and services based on their classification. Under this system, daily consumable products will be levied 5 per cent luxury tax while tobacco and liquor items have been imposed with 28 per cent tax. Similarly, 12 and 18 per cent tax will be levied on the purchase of other products. Indian finance minister Arun Jaitley has mentioned that the 28 per cent single GST will be lower than the existing 31 per cent indirect tax which includes excise duty and VAT.