Government to grip GST dialogue with India

The recent Composition Scheme of India under GST brought impact hence government looks forward for negotiation with India for minimal impact of GST

The government will conduct a final round of thorough consultative meeting with relevant stakeholders on the impact of tax reforms in India to the country’s economy.

The Prime Minister said negotiations are also underway with the Indian government for the minimal impact of the Goods and Services Tax (GST).

During the Meet the Press session, the Works and Human Settlement Minister, Dorji Choden, said the finance ministry, entrusted with the task to carry out the impact study of the GST, has made two visits to India so far. The ministry also conducted several consultations with the private sector and the industrialists in the country to assess and minimize the impact of the tax.

“Discussion is going on how we can negotiate with India to maintain levying taxes at the point of sale which is done at present,” said Lyonpo Dorji Choden.  “We are also looking at the legality how it can be fit in terms of legal concerns.”

Prime Minister Dasho Tshering Tobgay said a negotiation with the Indian government could be on exempting GST on vehicles entering Bhutan. “The other way we are looking at is to allow to go ahead and exempt GST for vehicles entering Bhutan, once it is inside Bhutan, to apply sales tax on point of sale,” said Lyonchhen.

 

“Right now, tax is applied on the point of entry. And we want to ensure that legally it is possible to move the imposition of the sales tax from the point of entry to the point of sales in Bhutan.”

Another way to reduce the impact of the tax reforms, the Prime Minister said, is for India to apply GST on vehicles imported from Indian and reimburse it to the government.

Streamlining the country’s tax regulation with the goods and services tax (GST) regime in India will need another sitting of the Cabinet with the finance ministry.

While several consultations have been conducted with the private sector representatives and industrialists, Prime Minister Tshering Tobgay has asked for a final consultative meeting.

One way, he said, is for India to apply GST on vehicles imported from India and reimburse it to the government. This means vehicle prices in the country will not drop because even in the earlier tax regime the government claims the excise duty refund from GOI.

However, vehicle dealers in the country said it could lead to price rise because the excise duty was 14 percent and the new GST on vehicles below 1,500 CC would come to 28 percent, making the vehicles costlier by 14 percent,

The other way, Lyonchoen said is to exempt GST on vehicles entering Bhutan. However, once the vehicles enter Bhutan, the government will apply sales tax sales tax on point of sale instead of point of entry.

The difference is that in the earlier methodology of applying sales tax at point of entry excludes FoB (free on board), incidental charges and agents’ profit, among others.

Should the BST be levied at point of sales, the seller or the buyer’s liability for goods that are damaged or destroyed during shipment between the two parties (FoB), incidental charges, and agent’s profit will be accounted for sake of BST calculation.

“We want to be very careful and ensure that it is legally possible to move sales tax from point of entry to point of sales,” prime minister said. “Otherwise, we may have to go ahead and allow imposition of GST and reimburse GST to the government.”

Either way, it looks like the government will not allow a further reduction in prices of vehicles.This was also in line with the Central Bank’s decision to reduce the loan to value ratio and transport loan.

Works and human settlement minister, Dorji Choden, said that the government had started discussion at a time when India started to implement it. A team from finance ministry visited India twice to find out the impact on Bhutanese economy.