June 21: Stakeholders have said that the government should radically reform the revenue system in order to control illegal imports from the border areas. Traders say that unauthorized imports will not stop as long as the tax to be paid by consumers in the domestic market is higher than in the Indian market. They say that domestic products cannot compete with Indian products as long as the domestic consumers have to pay more taxes for similar products.

Traders say that because India has recently reformed the tax system through the Goods and Services Tax (GST), unauthorized imports have increased in Nepal. Analyst and industrialist Jagdish Prasad Agarwal claims that informal business will not stop as long as higher taxes are imposed on domestic goods as compared to goods produced in India.

Traders say that unauthorized imports from India will not stop until the markets in border areas have goods at affordable rates.

“There is a need for radical reform in the revenue system,” says Agarwal.

A study report released by Nepal Rastra Bank (NRB) some time ago revealed the fact that 35 percent of the total value of goods imported from India is unauthorized imports worth Rs 400 billion.

In order to control such illegal imports, the government has deployed border security personnel to curb smuggling through the open border and to boost revenue collection.

However, the illegal imports have not stopped. In some cases, the illegal trade of daily consumable goods, clothes, dishes, electronic materials etc is flourishing under the political protection and in collusion with the government bodies responsible for curbing such acts.

Such unauthorized imports are not only harming the government’s treasury, but also pushing the business of domestic industries and importers on the bring of crisis. Experts say that being a landlocked country, the cost of production in Nepal is also higher than that of India, so the unauthorized import of cheap products from India is taking place.

Ashok Kumar Temani, president of Madhesh Province chapter of FNCCI said, “We have high production costs due to rise in prices of raw materials and transportation cost. If the government does not radically reform the revenue system, illegal imports will not be stopped.”

Temani claims that smuggling will not come under control until the government collects customs duties, value added tax (VAT) and other charges equal to GST.

In India, the government has reduced the prices of consumer goods by implementing multi-rate GST. There, such tax is applicable from 5 to 28 percent. As the GST is less on daily consumption and essential goods and more on luxury goods, the goods of general consumption are available at cheaper prices in the Indian market.

In Nepal, 13 percent VAT is levied from general consumption goods to luxury items.