KATHMANDU: large number of containers carrying pulses, grains, and other food items have been held up at customs due to importers failing to pass customs clearance. This situation has arisen following the government's introduction of an advance income tax (AIT) on food imports through the Finance Bill for the fiscal year (FY) 2081/82. The bill imposes advance income tax ranging from 1.5% to 10% on commercial food imports. Effective from May 28, the tax is set at 2% for rice and 10% for pulses, up from a previous maximum of 5%.

Subodh Kumar Gupta, president of the Nepal Rice, Oil, and Lentil Association, reported that approximately 400 containers belonging to 35 food industries have been stopped at the customs. "The new tax has increased the cost of importing food grains, leading businessmen to hold pulses and other grains at customs without completing the clearance process," Gupta said.

The association protested against the government's decision, arguing that the heavy advance income tax on daily consumables is unreasonable. Containers from 35 industries, including Shivshakti Agro, Nepal Agro, Triveni Dal Mill, Mahaveer Agro Processing, and Namaste Agro, have been halted at various customs points. Sushil Sharma, the information officer at Birgunj Dry Port Customs, noted that around 130 containers are stuck at Birgunj alone.

"Half a dozen importers, including Triveni Dal Udyog, Shivshakti Agro, and Nepal Agro, have not passed the customs clearance," he stated.

Anand Gupta, information officer of the Inland Revenue Department, told New Business Age that the increased advance income tax will no longer be refundable as before. Stakeholders worry that this non-refundable provision may further increase the price of imported food.

"Under the new legal system, if we import pulses worth Rs 10 million, we have to pay Rs 1 million as advance income tax," said Gupta. "This will significantly impact both businessmen and ordinary consumers."

The government argues that the increased advance income tax rate aims to protect domestic production. Finance Minister Barshman Pun has stated in various forums, including Parliament, that the hike in advance income tax is justified because the goods subject to the tax are produced in sufficient quantities within the country. He believes this policy will encourage local  production.

However, businessmen argue that relying solely on domestic products is not feasible for running the food industry at full capacity. The new Finance Bill imposes a 10% advance income tax on daily consumables such as potatoes, onions, lentils, and pulses. Similarly, a 2.5% advance income tax is imposed on the import of rice, flour, and other similar items. Businessmen claim that the high advance income tax on vegetables, potatoes, onions, and fish will lead to skyrocketing prices, adversely affecting common consumers.  

Bivor Agarwal, a member of the association, remarked that the government policy has made food grains more expensive. "Now, rice has become more expensive by Rs 100 per bag, and pulses and grains have increased by Rs 10 to 15 per kg," he said.

Nepal imports paddy and rice from India, while pulses and grains come from countries such as Canada, the USA, and Australia.