GST could boost business for Phuentsholing

 

Although the government claims that it is yet to understand the impact of India’s shift to the Goods and Services Tax (GST) regime on Bhutan, the move is expected to impact Phuentsholing differently.

With zero tax on exports under this regime, import into Phuentsholing and rest of the places in the country is likely to increase. However, residents in this cross border area will get to see two different prices of the same commodities and have options to buy between Phuentsholing and Jaigaon.

Unlike the current situation, Phuentsholing is expected have more advantage and could even attract customers from across the border.

Talking to Kuensel, a consultant, Naman Siddharth of ImsTaxoservice, who is working closely with Association of Bhutanese Industries (ABI) and Bhutan Camber for Commerce and Industries said that Bhutanese consumers need to understand that prices of goods is going to drop.

There will be no taxes in whatever they buy, he said, adding that the Bhutanese consumers should always prefer buying from Bhutan.

One of the major changes Phuentsholing and Jaigaon are expected to see is on the household (electronics) appliances.

Prior to the GST, the average VAT rate on most of the household appliances was charged between 11-12.5 percent in most of the Indian states. There was a 12.5 percent excise duty on household electronic appliances.

Considering the Central State Tax and other local taxes, an average of 25 percent to 26 percent tax was charged on such goods. Now, GST slab for the same is 28 percent but export is tax-free. This means, Phuentsholing will have a price edge of 28 percent over Jaigaon for the same electronics.

Since electronics have a market in the country’s growing construction sector, tables are likely to turn against traders across the border.

OHowever, Bhutanese traders will have to buy directly from the manufacturers to stay away from manipulations.

Cell phones, which attract hundreds of Bhutanese across the border today now come with a 12 percent GST. This means, Phuentsholing stores would have better to offer.

Naman Sidharth said that this is likely for Phuentsholing with the GST. “Market in Phuentsholing will boom,” he said.

Meanwhile, there is still confusion among Bhutanese consumers on whether they would be charged GST for buying from Jaigaon or not.

BCCI’s business representative in Phuentsholing, Lobzang Tshering, said, that until there are clear understandings and directives, he has nothing to say right now.

GST was initiated from July 1 this year. While there are no clear directives from both the governments, GST is expected to impact the domestic carbonated soft drinks manufacturer the most. Soft drinks manufacturers in India are exempted the 21 percent excise duty, which means they will have the advantage.

However, with raw materials getting cheaper, how much impact would our soft drinks manufactures have to bear is yet to be ascertained.