January 11: It has been three and a half years since the government announced to refund the value added tax (VAT) on the packaging material (monobox) purchased by the local pharmaceutical companies and tea industry from the domestic packaging industry. However, none of these industries have purchased monoboxes produced in the country.

The government made this arrangement through the budget of the fiscal year (FY) 2077/78. However, the industries which are getting VAT exemption on monobox import at the customs point did not show interest in purchasing monoboxes from the domestic industry.

According to the government policy, the VAT paid when purchasing monomoxes from the domestic industry will be refunded.

Rabindra Kumar Baranwal, president of Printo Pack Industries of Birgunj, argues that the industries can import monoboxes by paying only 1 percent customs duty and therefore the industries are not interested in purchasing such products from the domestic market.

"Industries have to pay VAT and seek refund from the government when buying packaging materials from the domestic industries. So they opt for an easy option for importing monoboxes to save cost and time  incurred in the process here,” said Barnawal, adding, 'Industrialists have not shown interest in purchasing domestic monoboxes because the time and process required to get back the tax paid to the government is very lengthy and complicated.”

The domestic industries that produces packaging materials pay 15 percent customs duty and 13 percent value-added tax to import paper, which is used as raw material to make monoboxes.

However, pharmaceutical companies and tea industries have to pay only 1 percent customs duty to import ready-made monoboxes from abroad.

Jugal Dhanawat, chairman of Archi Offset Printers, said that the customs duty levied on imported paper by the packaging industry is high.

“There should be at least one level of difference in the tariffs for the import of raw materials and finished goods. The packaging industry of the country is in crisis due to the high rate of customs duty which increases the cost of production,” Dhanawat said.

The domestic industries complain that they have not been able to benefit from the policy adopted by the government as the process of VAT exemption given by the government to the domestic industries is complicated.

Most of the monoboxes used in Nepal are imported from India.

About 6 dozen pharmaceutical industries in Nepal import monoboxes from India. Industrialist Dhanawat estimates that such industries in the country import monoboxes worth around Rs 3 billion every year.

Due to the import of such products worth billions of rupees from India, the domestic packaging industry is facing crisis because they cannot compete with Indian products.