The Indian government has agreed to compensate Nepali traders who are being levied higher duties on various logistic services since the implementation of the Goods and Services Tax (GST) on July 1. The Indian side has also assured that GST will not breach the provisions of the Nepal-India Trade and Transit Treaty.

These commitments were made during the Nepal-India commerce joint secretary level meeting held in the Indian capital of New Delhi on Tuesday. A 20-member Nepali team, comprising officials of the Ministry of Commerce, the Ministry of Finance and the Ministry of Foreign Affairs, and representatives of the Federation of Nepalese Chambers of Commerce and Industry, had attended the meeting. The Nepali

delegation was led by Commerce Joint Secretary Ravi Shankar Sainju, while the Indian team was led by Commerce Joint Secretary Bhupendra Bhalla.

“The Indian side said issues raised by Nepal will now be forwarded to the GST Council. The council will come up with appropriate measures to address our concerns within one-and-a-half months,” said Sainju.

During the meeting, the Indian side also acknowledged the failure to convey information to smoothen cross-border trade following GST’s implementation,

Sainju added.

India has enforced the GST as ‘One Country One Tax’ regime eliminating 17 difference types of taxes, charges and fees and replaced them with a single tax structure classified under five categories. The GST slab ranges from zero percent to 5, 12, 18 and 28 percent depending on the nature of the transactions. The tax is being levied on every transaction of goods and services, except on exempted goods and services, goods that are outside the purview of the new tax regime and transactions which are below the prescribed threshold limits.

With the Nepal-India Trade and Transit Treaty in effect, the Indian government is supposed to waive the tax to the Nepal bound traded goods. The bilateral treaty talks about providing free transit route to the landlocked country.

However, with implementation of GST, Nepali traders had witnessed delayed movement in exports and imports of goods to and from third countries via India, which was blamed largely on the confusion over the implementation of the tax. In addition, Nepali traders were also being affected by an increase in logistic service charge on goods imported from third countries.

According to traders and freight forwarders, the authority at the Kolkata Port earlier used to impose 15 percent logistic service charge on goods imported from third countries. With GST coming into effect, that charge has been raised to 18 percent. 

Since GST’s implementation, the Kolkata Port authority has also started imposing 5 percent service charge on Nepali products exported to third countries. Previously, no service charge used to be levied on Nepal’s exports.

Showing concern on the problems that Nepali traders have been facing since the implementation of GST, Nepali government had been requesting the Indian side to waive the new tax on Nepal bound traded goods. Sainju said the Indian side agreed at the meeting held on Tuesday, to refund the extra tax imposed on concerned

traders provided the transaction was done through the formal channel.