Among others, a reduction in customs duty is expected to have a positive impact on the Bhutanese economy 

GoI: The reduction in customs duty by the Indian government in its national budget 2015-16 is expected to make import of some goods from India cheaper.  Customs duty is an indirect tax levied on goods imported into or from a country.

Though India’s financial year begins from April 1, the impact could be felt from June, according to officials.  Due to a direct correlation, the tax measures announced will have indirect impact or open areas of opportunities for Bhutan.

The Indian government has reduced basic customs duty on 22 items, including raw materials, components and intermediaries, which will reduce manufacturing costs.  This was revealed during the presentation on “Indian budget 2015-16: Opportunities for Bhutan” at Tashi Taj hotel in Thimphu yesterday.

This, the chief executive officer of Druk Punjab National Bank (PNB), Mukesh Dave, said would have a positive impact on Bhutanese economy with reduced costs of import. “The reduction of the excise duty will result in reduction of the import cost for Bhutan as a number of items included in the list result in Indian rupee outflow,” he said.

The 22 items also include organic LED television panels, material used for manufacturing telecommunication grade optical fibre cables and black-light unit module used to manufacture LCD and LED television panels.  This is expected to make the import of electronic items cheaper for Bhutan.

Electronic makers in India have welcomed the move, as it is expected to boost local manufacturing of electronics in India, as customs duty has come down to zero from 10 percent.

Likewise, Mukesh Dave said that the Indian government’s special focus on northeastern states, by launching of important infrastructure projects would benefit Bhutan.  An All India Institute of Medical Sciences (AIIMS) in Assam and Centre for Film Production, animation and gaming in Arunachal Pradesh are also planned.

“Apart from the ongoing projects in Bhutan, the development of infrastructure and other projects in the bordering states of Bhutan will provide a fillip to the trade along the border,” Mukesh Dave said. “The impact of the reforms initiated in the budget will take time to be visible. However, it can be seen as another positive forward step in strengthening of Indo-Bhutan ties,” he said.

Speaking during the presentation, Indian ambassador Gautam Bambawale said, neighbours like Bhutan should gain from India’s economic growth.  He said Bhutan should promote agro-processing industries to promote export. “Bhutan should go beyond hydro-power and tourism.”

Bhutan Chamber of Commerce and Industry (BCCI) president, Ugen Tshechup Dorji, said double taxation avoidance agreement signed between both the governments in March 2013 had not worked for the business community.  Both the governments have completed the internal procedures for its implementation and the agreement came into force with effect from 17 July 2014.

He also said that it was difficult for Bhutan to become a manufacturing country, but it could be a trading country like Singapore. “Bhutan should aspire to become a trading country,” he said.

The scheduled rates of additional customs and excise duties on petrol and diesel have been increased from Rs 2 per litre to Rs 8 per litre.  But its impact will not be felt in Bhutan, Mukesh Dave said.

By MB Subba