Consumer rights groups have asked the government to withdraw VAT on potatoes, onions and other vegetables, fruits and various food items.

These items were previously untaxed, but the budget statement for the coming fiscal year slapped 13 percent VAT on them with the government exploring all possible ways to boost revenue. Consumer rights groups are livid.

“The government is imposing VAT on essential food products which the country has to import as local production is not sufficient. This is against human rights and is a crime by the state against its people,” fumed Bishnu Prasad Timilsina, general secretary of the Forum for Protection of Consumer Rights-Nepal.

"It is an injustice to impose VAT on consumers’ mouths," Timilsina said. "The government should cut down on its expenditure instead of kicking people in the stomach. They are already having a hard time because their purchasing power has been slashed by high inflation."

The Forum for Protection of Consumer Rights-Nepal, Consumer Rights Investigation Forum and National Consumer Forum have threatened to mount strong protests if the government does not remove VAT on imported vegetables, fruits and other food items.

Nepal imports potatoes, onions and other vegetables, fruits and other food items from India and other countries as it does not produce enough to feed the people.

Speaking at an interaction programme on Thursday in Kathmandu, consumer rights activists said that people had not been able to obtain essential vegetables easily since the government published the new budget.

“The government has ignored consumer rights and food-related rights provided by the constitution by imposing VAT on essential goods. This step has not only impacted supply, but also led to increased black marketing and profiteering forcing people to pay exorbitant prices for basic products,” the consumer rights activists said in a joint press statement.

Potatoes, onions and other daily consumable farm products are exempt from VAT under the Value Added Tax Act of 1996. But while preparing the new budget, the government amended the law through the Financial Bill 2023 and removed 170 goods from the tax-free list.

Taxes totalling 23.5 percent tax are charged on potatoes, onions and other vegetables, fruits and food items—9 percent agriculture service charge, 1.5 percent advance tax and 13 percent VAT.

"The government is not making the least effort to increase domestic production. Farmers cannot get fertiliser, subsidies and other facilities on time, leading to a drop in farm output," Timilsina said. "Instead, it is slapping taxes on basic kitchen staples. What can you expect from a government like that?"

Timilsina said that imposing VAT would not increase revenue for the government. "In fact, it will benefit traders who bring potatoes and onions through illegal channels. We have seen this happening when the government banned the import of luxury goods last year,” he said.

"After the government imposed VAT on basic food products, the cost of living increased sharply for the Nepali people," said rights activists.

According to Nepal Rastra Bank, food and beverage inflation stood at 5.54 percent in the first 10 months of the current fiscal year, with overall inflation reaching 7.41 percent.

Under the food and beverage category, the year-on-year price index of the spices sub-category increased by 26.61 percent, restaurant and hotel 14.87 percent, cereal grains and their products 13.69 percent, and milk products and eggs 10.41 percent.

The Financial Bill has imposed 13 percent VAT on imported onions, potatoes, garlic, peas, frozen green leafy vegetables, collard greens, beans, spinach, sweet corn and other green vegetables.

Consumer rights activists have demanded that a relief programme for consumers, among other things, be announced before Parliament passes the budget.

They have also demanded that the government mobilise the federal, provincial and local governments effectively for market inspection.

For a healthy and competitive market, the minimum market standards need to be prepared and implemented, consumer rights activists said.

They have asked the government to prepare price and quality standards for goods and services, and also assure supply management by determining the maximum price of essential goods and services.

Consumer rights activists have demanded the elimination of all types of middlemen who only seek profits without doing labour or investing capital. The supply chain from producers or importers to consumers should be made consumer-friendly, they said.

To control prices in the market, fair price shops need to be opened at every local unit and they should hold emergency stocks of essential goods like food, medicine and fuel.

Strict action needs to be taken against artificial shortages, artificial price hikes, syndicates, cartels, distribution of low quality goods, misleading advertisements, short measure and unhealthy competition.

Market governance should be implemented by forming a consumer court and by establishing a consumer protection commission. Consumer rights activists have also demanded the enforcement of court orders and decisions related to consumer rights protection.