Tax exempted on books

Tax: Following an appeal from bookstore owners in Thimphu, the finance ministry has lifted both customs duty and sales tax for all books imported during 2015.

A notification issued by the ministry states that the decision was made to encourage Bhutanese to read and also because it is the National Reading Year.

The issue arose in May when the Department of Revenue and Customs (DRC) suddenly enforced a 20 percent customs duty on books imported from India but printed in a third country.

While books printed and imported from a country other than India are subjected to a 20 percent customs duty and a five percent sale tax, books imported from India were being exempted from customs duty until May.

The sudden enforcement caused one bookstore owner, Kunzang Choki of Junction bookstore, to write to the DRC requesting a re-consideration of the imposition of the customs duty on grounds that only sales tax can be levied on imports from India according to the Free Trade and Commerce Agreement between Bhutan and India.

Kuzang Choki said that even if the books were printed in a third country, the Indian distributors or publishers would have already paid taxes for importing them into India and included it in their costs. “So, in effect, we are required to pay double customs,” she said, in an earlier interview.

However, the DRC responded to the bookstore owner that it would not be able to reconsider its decision, as the importer has to submit an excise duty invoice issued by the Indian government that would authenticate that the goods are of Indian origin and that the duty had been paid by the importer to the Indian government.

In response, 11 bookstore owners appealed to the Prime Minister, who told media that the government would lift the tax if it can be done legally, and as it had been enforced without informing the finance ministry prior and during the National Reading Year.

“What DRC did was not wrong,” finance minister Namgay Dorji told Kuensel. “We were under the impression that all books were imported from India.”

In the recent notification, the finance ministry states that the customs duty on books is not a new tax and has been levied in the past.

Bookstore owners also raised questions on why the 20 percent customs duty was only being implemented now if the rule had always existed.

“However, there are not many incidences of customs duty being levied on the import of books from India as the customs control measures at the operational level is managed on risk assessment basis due to large volume of imports and lack of space,” it is pointed out in the finance ministry’s notification. “Therefore, detailed physical verification of books is not carried out regularly as books are considered as low risk products,” it is added.

The finance minister pointed to provisions in the Sales Tax, Customs and Excise Act of Bhutan 2000, and the Income Tax Act 2001, that allows the ministry to grant tax exemptions or holidays in the interest of the public.

However, while bookstore owners have welcomed the lifting of the customs duty, its limitation to only 2015 has been not.

“We are grateful that the Ministry of Finance has exercised its authority to exempt customs and sales tax but just because this year is dedicated to reading does not mean that next year or the years to follow aren’t just as important,” Kunzang Choki said. “Every year we should try to come up with ways to encourage more children to read. This 20 percent tax creates an obstacle for reaching out to as many people as possible as it becomes unaffordable.”

She added that if the customs duty were reinstated from next year, the message would be that reading is only important in 2015. “Placing a tax on books discourages many from reading as it becomes too expensive, too much of a luxury, especially for those who do not have the necessary means to afford these commodities,” she said.

The proprietor of DSB Books, BP Sharma, shared the same view. He said that a tax holiday or exemption should be provided indefinitely as lower prices would mean more readers. He also pointed out that better quality books are usually printed in Europe or China and that if the tax is continued, bookstores may be discouraged from bringing such books to Bhutan.

He added that the country’s literacy rate should also be considered. The literacy rate in Bhutan, as of 2012, was 63 percent, according to the National Statistic Bureau.

However, BP Sharma also said the government must be specific in terms of whether the tax exemption occurs from January 2015, as his bookstore had already paid the recently implemented customs duty for books imported for two books fairs held in the country. He said if the exemption is from January, then the government should refund bookstores that have already paid the 20 percent customs duty for books imported from India, this year.

Gyalsten K Dorji 

Additional reporting by Tshering Dorji

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