The government is planning to introduce “import restriction mechanism” through the upcoming annual budget 2018-19, in order to safeguard domestic productions. The budget will focus on promoting local products along with policies that will generate employment, said Revenue Secretary Shishir Kumar Dhungana, on Thursday.

Speaking at a pre-budget discussion organised by Federation of Nepalese Chambers of Commerce and Industry, Dhungana said the government would impose tariff and non-tariff measures such as quantitative restriction on the imports of goods that are affecting domestic products. “We are introducing import rationalisation mechanism through the budget,” Dhungana said.

Dhungana expressed his view in response to the private sector’s queries about the upcoming budget that the government will announce on May 29. “The budget will introduce policies to discourage malpractices while doing business in Nepal,” said Dhungana, adding that the government would not tolerate traders who make wrong declaration on imported goods.

Dhungana also pointed out another area of concern, under invoicing, that is commonly seen in the export business. He expressed skepticism on the export prices of goods such as woolen carpet and yarsagumba, which a number of exporters have been showing on their billings.

As per the Finance Ministry, a number of firms have been billing woolen carpet for export at just Rs25 per square metre while yarsagumba export price is a mere Rs5,000 per kg. Traders have been blamed for being involved in such practices to avoid paying income tax. According to Dhungana, the government this year has collected only Rs150 million from the export sector.

Through the budget, the government is also likely to revise the provision of cash incentives to exportable goods. The government now provides up to 4 percent of cash incentives in export items based on the value addition to these products. “The budget could implement the provision of providing cash incentives based on the income tax paid by the exporters,” Dhungana added.

Private sector on the other hand urged the government to implement the multiple VAT system, to increase the rate of cash incentives on exportable goods, to revise the reference price system at customs points and to revise the import duty on import of raw materials.

Pawan Golyan, president of Yarn Manufacturer’s Association, said a large volume of substandard yarn is being imported through under invoicing.

“In addition, such goods are getting up to 35 percent exemption in customs duty whereas the raw materials used for making yarn get only up to five percent of the exemption,” Golyan said.

Dhruba Thapa, president of Cement Manufacturers’ Association of Nepal, said there was a need for policy reform to make the country self-reliant in a number of products such as cement.

“In a number of cases, harmonised system codes issued for the same raw materials purchased from separate vendors are different. As a result, importers are liable to pay different duty for the same products.”

Kiran Kumar Dangol, senior vice-president of Federation of Handicraft Associations of Nepal, also urged the government to simplify the process of receiving cash incentives along with revising its rate. He also sought the need for increasing the price ceiling of handicrafts items that the traders showcase in the international market. At present, the government allows handicrafts worth $150 to be displayed at international exhibitions.

Kiran Gautam, president of the Solar Electric Manufacturers Association Nepal, sought the budget to remove VAT in devices used for solar energy production in rural areas. “With the implementation of VAT in rural solar energy projects, very little of the power generated is being supplied to the national grid,” Gautam said. As per the association, Nepal Electricity Authority has been receiving only four MW of electricity out of the 55 MW installed capacity from solar projects.