India’s GST regime sends triggers chaos among trading partners in South Asia

The Goods and Service Tax (GST) wave seems to have crippled countries across South Asia even as these countries try to understand and compute what it has in-stored for them, say media reports.

Pedestrians and cyclists cross the border between India and Nepal in Sunauli. Getty Images

Factories in the commercial town of Bhutan, Phuentsholing, were unable to export for over a week as per the country’s only financial newspaper, Business Bhutan. Hundreds of trucks remained stranded along India-Bhutan border as they failed to avail clearance.

This was mostly because land customs office at the border were not prepared and efficient to implement the online GST system. Another reason cited by the weekly was apprehension amongst traders that they will not get the refund for the tax imposed under the new system.

Talking to Business Bhutan, the manager of Bhutan’s highest ferrosilicon exporter, Bhutan Ferro Alloys Limited (BFAL) said suppliers unwillingness to order as they were confused with how GST would impact Bhutan.

Meantime, The Bhutanesenewspaper reported that Bhutan has requested the Indian government to make special concessions whereby India has asked for two months time for GST to be fully implemented and study how it has affected Bhutan.

Kathmandu Post also reported a plunge in third country imports and exports via India and delays as custom officials upgraded their systems to incorporate new taxes.  There were also reports of third-country goods becoming costlier soon after it became effective.

Nepalese media house also wrote about possibilities that the bilateral Trade and Transit Treaty, ‘traffic in transit’ could exempt from customs duty and from all transit duties or other charges imposed in transit.

Nepal’s Ministry of Commerce has written to the Indian counterpart urging GST waiver on Nepal bound goods. A delegation was also supposed to visit New Delhi to discuss the issue after India sought a detailed report on the impact.

“GST should not undermine the spirit of the trade and transit treaty,” said Nepalese ambassador to India, Hari Prasad Odari told Kathmandu Post adding if the issue is not discussed, it is likely to immensely affect traders in that country.

Earlier, India had done away with a 4.5 percent service tax on imports from that country after the Nepalese government raised objections that it violates the provision of trade and transit treaty.

Bangladesh was equally affected by the imposition of GST as similar issues occurred at the at Gojadanga and Mahadippur land port due to system-related hurdle added to the woes of the exporters. 

Hindustan Timesreported of how GST roll out impacted Bangladesh and how it lost over Rs 10,000 crore due to failure of timely up-gradation at Mahadipur port.

Although, there have been no reports of how the GST roll-out affected Maldives is still speculating the impact and except for the director of Maldives inland revenue, Mohamed Shahid claiming it could only affect Maldivian visiting India as tourists, students and for medical treatments.

Meantime, India is waiting for the 16 September deadline until GST is fully implemented and it can analyse how the tax reform has impacted its neighbours before it responds.

Firstpost has learnt India has conveyed its neighbours that it will bilaterally look into the concerns and address it without compromising on the GST bill.


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