Streamlining the country’s tax regulation with the goods and services tax (GST) regime in India will need another sitting of the Cabinet with the finance ministry.
While several consultations have been conducted with the private sector representatives and industrialists, Prime Minister Tshering Tobgay has asked for a final consultative meeting.
During the meet-the-press session yesterday, Prime Minister said that the negotiations are underway with the government of India.
One way, he said, is for India to apply GST on vehicles imported from India and reimburse it to the government. This means vehicle prices in the country will not drop because even in the earlier tax regime the government claims the excise duty refund from GOI.
However, vehicle dealers in the country said it could lead to price rise because the excise duty was 14 percent and the new GST on vehicles below 1,500 CC would come to 28 percent, making the vehicles costlier by 14 percent,
The other way, Lyonchoen said is to exempt GST on vehicles entering Bhutan. However, once the vehicles enter Bhutan, the government will apply sales tax sales tax on point of sale instead of point of entry.
The difference is that in the earlier methodology of applying sales tax at point of entry excludes FoB (free on board), incidental charges and agents’ profit, among others.
Should the BST be levied at point of sales, the seller or the buyer’s liability for goods that are damaged or destroyed during shipment between the two parties (FoB), incidental charges, and agent’s profit will be accounted for sake of BST calculation.
“We want to be very careful and ensure that it is legally possible to move sales tax from point of entry to point of sales,” prime minister said. “Otherwise, we may have to go ahead and allow imposition of GST and reimburse GST to the government.”
Either way, it looks like the government will not allow a further reduction in prices of vehicles.This was also in line with the Central Bank’s decision to reduce the loan to value ratio n transport loan.
Works and human settlement minister, Dorji Choden, said that the government had started discussion at a time when India started to implement it. A team from finance ministry visited India twice to find out the impact on Bhutanese economy.
She added that Bhutan imports almost 90 percent from India. Tax reform in India, she said, would have impact on the country’s economy.