Goods imported via Indian ports to become dearerForeign goods imported to Nepal via Indian sea ports are going to become expensive, as the Indian government has imposed 4.5 percent service tax on ocean freight cost, drawing criticisms from Nepali traders.
Foreign goods imported to Nepal via Indian sea ports are going to become expensive, as the Indian government has imposed 4.5 percent service tax on ocean freight cost, drawing criticisms from Nepali traders.
Although the Indian government had introduced the tax for its importers, the provision has affected Nepali traders as well, as Nepal fully relies on Indian clearing agents to handle third-country goods that land at Indian ports.
These agents have already started transferring the additional cost to Nepali importers, making third-country goods imported via Indian ports expensive.
“It is illegal to impose such a tax on transit cargoes, but the Indian government simply does not care,” said Rajan Sharma, former president of the Nepal Freight Forwarders Association.
The Article 11 of the World Trade Organisation’s Trade Facilitation Agreement states: “Traffic in transit shall not be conditioned upon the collection of any fees or charges imposed in respect of transit, except the charges of transportation or those commensurate with administrative expenses entailed by transit or with the cost of services rendered.”
The tax was imposed after the Revenue Department of India, on January 12, issued a notice in this regard.
“On January 16, the Container Corporation of India Limited (CONCOR), an Indian government undertaking that handles Nepal’s railway freight from Kolkata port, informed us about the decision and has since been slapping 4.5 percent duty on our ocean freight costs,” Sharma said.
Ocean freight costs vary depending on the distance of the country from where goods are imported. For instance, ocean freight cost to ferry every 20-foot container from China to Kolkata ranges from $600 to $1,600, according to Sharma. This cost ranges from $3,700 to $4,500 per 20-foot container if goods are shipped from the US.
“Since taxes are being imposed on these costs, goods bound for Nepal from Indian ports have started becoming expensive,” said Sharma.
Nepal government, however, has not held discussion on the matter with Indian authorities.
A high-level government official, requesting anonymity, said the problem will not be resolved unless the matter is raised at the ministerial level. “We should submit a protest letter to India requesting removal of such provision [for Nepal-bound cargoes],” he said.
Ek Narayan Aryal, Consular General at Kolkata, said he has already raised this issue with the Indian officials at the local level, but they have not shown any sign of exempting Nepal-bound goods from the tax.
“Indian officials have said government-to-government level talks should be held to resolve the problem,” Aryal said.
Nepali Embassy in Delhi has said that they have informed the Ministry of Commerce and the Ministry of Foreign Affairs about this issue. But embassy officials said since the decision was taken by the central government of India, another decision should be made at that level to revoke it.