Value added tax shoots prices of essentialsRice, pulses, sugar and flour have become dearer after the budget
Retail prices of essentials have jumped by up to 30 percent because of the imposition of value added tax on transport services and rising costs in India, traders said. According to retailers, prices of rice, pulses, sugar and flour rose steeply particularly after the budget statement was issued on May 29. Raj Kumar Shrestha, president of the Nepal Retailers’ Association, said food items have become dearer by up to Rs40 per kg.
Shrestha said the price of moong (green gram) surged to Rs170 per kg from Rs130. Likewise, the price of rahar (split red gram) has increased to Rs150 per kg from Rs135 per kg, sugar has increased to Rs80 from Rs75, maas (split black gram) has increased to Rs130 from Rs110 per kg, and sunflower oil has increased to Rs150 from Rs135 per kg. According to him, rice has also become expensive by an average of Rs50 per 20 kg sack. Shrestha said retail prices shot up after importers and wholesalers raised the prices of their products. “Many of them jacked up the prices citing the recently enforced value added tax on cargo transportation while a number of them blamed the rise in prices in India during the recent elections there,” said Shrestha. He said suppliers hiked prices of edibles also on the pretext of soaring fuel costs. According to him, sugar factories, showing an increase in their production costs, had raised the price of the sweetener before the budget statement was issued.
The government brought goods transport service under the value added tax net by enforcing the Finance Act 2019-20 a few days ago. In addition, the government has revised the excise duty and customs duty on a number of edibles including wheat flour, packed food items such as potato chips, noodles and fruit juice, among others, according to traders. Rajesh Kaji Shrestha, president of the Nepal Chamber of Commerce, said the imposition of value added tax on essentials contributed to the rise in prices. “On the one hand, the government talks about protecting domestic industries while on the other hand it raises the tax even on essentials that are used as raw materials by the food industry,” said Shrestha.
The Finance Act has brought wheat flour under the value added tax bracket due to which the price of flour has gone up, traders said. Ajay Parajuli, executive secretary of the Nepal Flour Mills Association, said flour could become dearer by Rs5-6 per kg because of the imposition of value added tax on agro products. According to him, wheat flour is used to prepare a number of food items such as bread, biscuits and noodles. “Following the government’s move, prices of all these products are likely to go up,” said Parajuli. Parajuli added that the government’s move could also lead to increased smuggling of the agro product. “As the Indian government has waived tax on flour, the Indian product is cheaper compared to the domestic product even now,” he said.