June 9: Businessmen are hesitant to import fruits and vegetables after the government announced in the budget statement to impose Value Added Tax (VAT) on the import of daily consumable items.

Finance Minister Dr Prakash Sharan Mahat has adopted the policy of canceling 13 percent VAT exemption on such items for the next fiscal year. With this decision, VAT will be imposed on items such as onions, potatoes, garlic, peas, frozen green leafy vegetables, collard greens, beans, spinach, sweet corn, other green vegetables and avocados, apples, quinces, apricot, cherry, strawberries, raspberries and cranberries, blueberries, kiwi, persimmon,  and other fruits. Similarly, cotton, wool along with frozen meat items such as beef, lamb, pork, chicken, turkey and duck meat will also be subjected to VAT.

With the increase in taxes, prices have also started to rise. Onion which was Rs 40 per kg before the budget announcement has now reached Rs 60 per kg. Traders said that the price of apples, which used to be around Rs 280 to Rs 300 per kg, has increased to Rs 350 to Rs 400.

No vegetables from outside the country have arrived since the last five days at the Kalimati Fruits and Vegetables Market. The wholesalers of Kalimati have not imported potatoes, onions and other vegetables, demanding that VAT be withdrawn on essential items. Potato traders were paying customs duty of Rs 4 per kg. On top of that, the government has now added 13 percent VAT. Importers have been paying customs duty of Rs 6 per kg for the import of onion. The price of onions has increased after imposing VAT.

Traders insist that they will not import fruits and vegetables because VAT cannot be calculated on perishable goods. According to businessman Surendra Shrestha, such items should be exempted from customs duties. There is no condition to import fruits and vegetables until the VAT is revoked. According to Shrestha, traders refused to import vegetables from foreign countries from the day after the budget was announced.

Nepal imports vegetables worth Rs 40 billion and fruits worth Rs 22 billion annually. Even though the government has adopted a policy of import substitution, it has not done any preparations. According to the experts, increasing the import duty on agricultural products when the domestic production is not enough will only add burden to the consumers. According to the experts, after the government imposed tax on vegetables and fruits with the policy of increasing revenue, the effect of this has been felt in the kitchen of the consumers.

According to the Ministry of Finance, although VAT has been announced on perishable items, the government has also fixed a certain threshold.

Officials of the ministry say, that the import of vegetables and fruits worth less than Rs 5 million will be exempt of VAT.