Given the close relation between the two countries and India being Bhutan’s biggest trade partner, the Bhutanese economy is beginning to feel the impacts of the recent tax reform in India.
For more than a week now, about 300 trucks carrying Bhutanese goods are stranded in the border town of Jaigaon. The need to check every document involved in the export and import of goods because of the recently implemented Indian Goods and Services Act (GST) has frozen trade movement between the two countries.
The business community is anxious and calling on the government to intervene in sorting out the customs process. Although the issue is with the customs office across the border, there is still a need for the government and business representatives to explore options to resolve bottlenecks that affect trade.
While the business community has submitted proposals to cushion the impact of GST on the economy, we must understand the reality that it is Bhutan, which has to adjust to GST and not the other way around. What matters here is how we negotiate the impact.
The two governments have always settled issues through dialogue and it is hoped that the authorities would meet soon to thaw the customs process that has halted the movement of goods. While at it, the government, which claims to be studying the issue for sometime now must also come up with measures at home.
Concerns have already been raised on how the new tax regime would widen the trade deficit with India, which stands at 70 percent today. It is projected that the government would lose Nu14 billion in terms of revenue earnings due to the fall in prices. Our industries are hit and operations in some have stopped.
While the people have been told about the impacts of GST on the Bhutanese economy, little has been shared with the people on what is being done about it.
The recent move by the government to collect sales tax on vehicles from point of sale instead of point of entry appears to be one such adjustment to GST. The move has however raised some legal questions because some see a change in the collection of taxes as an alteration of taxes. The argument is that since the sales tax on vehicles is collected from the point of sale, which is the dealers instead of point of entry, the customs gate, the consumers are paying more. With taxpayers affected, some see this change as an alteration of tax, which means it needs the parliament’s endorsement. The government claims that it has not altered the tax rate but only changed the point of collection.
There is a need to clarify these processes at home even though it is understood that these measures were put in place to lessen the impact of GST. We call on all agencies to work with the government in coming up with measures to adjust to this tax reform in India. For we undertand that if India sneezes, Bhutan catches cold.