Importers, suppliers, distributors, dealers, wholesalers, and retailers gaining from the Indian goods and services tax (GST) should not con- sider the benefit as profit.
The benefits, officiating secretary of economic affairs ministry, Sonam P Wangdi, said should be passed down to the consumers and that the office of consumer protec- tion would ensure that prices are not distorted.
A notification was also issued on August 28 to this effect.
About 81 percent of goods and services in India fall below or in the 18 percent tax band and the rest falls under 28 percent tax band. However, for Bhutan GST will not be imposed as the Indian GST law specifies that exports from India to any country will be zero-rated, meaning that goods of Indian origin will be cheaper in Bhutan.
Sonam P Wangdi said that the price impact in Bhutan will be fully ascertained after the GST system in India is streamlined and fully implemented.
To avail of the benefit of GST, Sonam P Wangdi said that Bhutanese importer and suppliers should procure goods from either principal companies or GST registered entities in India.
There are two ways to avail the zero-rated GST. One way is for the Indian suppliers to pay GST at source and upon fulfillment of the documents proving that goods are exported, the supplier can claim the refund from the Indian government. Other way is to execute a bond with a bank guarantee that goods are meant for export, the Indian entity supplying goods can get away without paying GST. Again these Indian entities must be GST registered.
If Bhutanese traders import goods from non-GST registered entities, the GST will be passed to them making goods more expensive. This could make the particular business less competitive than businesses who source their goods from GST registered entities in terms of price.
Even in India, along with the GST law, anti-profiteering law also came up to ensure consumers get the benefit after 17 state and central level taxes are subsumed by the GST.
For Bhutan, Sonam P Wangdi said the country’s own consumer protection Act covers most aspects. He said that a team is in Phuentsholing working on the prices. “The office of Consumer protection will ensure that no consumers pay more than what they should,” he said. “Non-compliance to the notification would be dealt as per the law including financial penalty and even cancellation of licenses.”
With goods becoming cheaper, import bill for the country is also expected to decline. For example prices of rice, cereals, medicines, fertilsers, yarns and 2,031 other items in zero sales tax slab could drop by 12.8 percent.
Similarly the import bill of 54 items in the 20 percent tax slab could drop by 16.2 percent. Import value of vehicles not exceeding 1,500 cc is expected to decline by 13.6 percent and those above 1,500 cc could decline by 21 percnet. Least fall in import value of three percent is expected for 24 items in the 30 percent sales tax slab, which include aerated water and juice below 350ml.