Despite the downward revision of the customs duty for third-country imports, the price of commodities in the market has not changed.
Opposition Leader Dorji Wangdi asked the finance minister why the reduction in customs duty has not benefited the consumers, importers, and retailers after its six months of implementation.
The Parliament passed the Customs Bill 2021, which reduced the customs duty, an indirect tax levied on third-country imports, to a uniform rate of 10 percent from 50 percent in the summer session this year.
Finance minister, Namgay Tshering said that the price of consumer goods from the third countries has not dropped because of the rise in the cost of production and transportation due to the Covid-19 pandemic.
“If the tax of goods imported from third countries was like earlier, the price would have gone up twice or thrice,” Lyonpo said adding that six months was inadequate to conclude whether the revision helped.
Regarding the refund of the excess customs duty, Lyonpo said that about seven businesses have approached the ministry. However, upon review, it was found that the consumers have not benefited from the revision and thus, the ministry could not reimburse.
Additionally, he said the government also supported the importers and wholesalers with a 5 percent interest working capital loan to help with the supply disruptions.
Lyonpo said that the Public Finance Act of Bhutan 2007 requires the money bill to be executed from the time it is introduced in the National Assembly (NA).
Before the money bill goes to the National Council (NC) and His Majesty The King grants consent, it has to be executed, he added. “That creates confusion.” As per the recommendations received from the two houses, the minister said that the finance ministry was reviewing the Act and it would be tabled in the summer session next year.
The minister introduced three money bills, the Customs Duty (Amendment) Bill of Bhutan 2021, Tax (Amendment) Bill of Bhutan 2021, and Goods and Services Tax (Amendment) Bill of Bhutan 2021 in the NA yesterday.
Lyonpo said that the money bills are submitted for amendment due to the revisions made in the “Convention on the Harmonized Commodity Description and Coding System (HS).”
The revisions to the HS 2022 have resulted in changes in the Bhutan Trade Classification (BTC) Code, Tariff Schedule, and textual changes in the Schedule in the Acts. Lyonpo said that HS 2022 has to be implemented by January 2022.
The HS revision is an update in the product list and restructuring of the product for simpler classification of goods and more visibility in international trade statistics.
Lyonpo also said that the new tax rates proposed in the Bills are all within the existing rates except for the solar water heater which is proposed to be reduced from 5 percent to 0 percent in the Tax (Amendment) Bill 2021, 10 percent to 0 percent in Customs Duty (Amendment) Bill 2021, and 7 percent to 0 percent in GST (Amendment) Bill 2021 in order to encourage the use of an alternate source of energy.
The Bills were referred to the legislative committee for review.
The 351 sets of amendments to HS 2022 have led to the creation of new 400 BTC codes and deletion of 170 BTC codes thereby resulting in having 5,889 eight-digit BTC Codes in BTC and Tariff Schedule. There were also about 132 textual changes to the schedule.
HS serves as the basis for levying taxes, duties and for the compilation of international trade statistics in 211 economies (of which 158 are Contracting Parties to the HS Convention). It is administered by World Customs Organisation and is revised every five years.
Edited by Tshering Palden