August 8: India's goods and services tax (GST) will no longer be levied on transit cargo shipments from Nepal to third countries via India. Until now, only the shipments entering Nepal were exempt of GST. However, the shipping companies used to charge GST on products exported from Nepal at Kolkata, Haldia and Visakhapatnam ports of India.

In September 2017, India had issued a notice to concerned bodies not to collect GST on cargo entering Nepal. Since the notification did not say anything about the shipment going out from Nepal, the service providers were charging GST on the goods exported from Nepal.

Goods and services exported from India to Nepal are also exempt from this tax. The revenue department under the Ministry of Finance of India, in a notice issued on August 3, has made it clear that GST will not be charged on both transit cargo going to and coming out from Nepal.

After the notice issued of the department, now the shipping companies will not be allowed to collect GST on all container shipments returning from Nepal.

The Ministry of Industry, Commerce and Supplies had taken the initiative with the concerned bodies of India to remove such taxes.  Last month, Commerce Secretary Ganesh Prasad Pandey requested the Indian authorities to remove GST on transit cargo from Nepal to third countries. 

Ravi Shankar Sainju, former joint secretary of the ministry, said that this arrangement will have more beneficial for the exporters of Nepal.

“In the provision made by the GST Council five years ago, it was not clear about the cargo going out through Nepal. Taking advantage of this loophole, they were collecting taxes on the export and empty containers,” said Sainju. 

Naresh Agarwal, vice president of Nepal Freight Forwarders Association, said that since GST is charged in the name of various services in Indian ports on containers that have gone from Nepal, now that amount will be saved. “This is a positive aspect of Nepal's overseas trade. This will reduce the cost of doing business,” Agarwal said.