Kathmandu, Sept 7: India recently reduced its Goods and Services Tax (GST), prompting concern among Nepali business owners near the border. The GST Council meeting on Wednesday revised the tax slabs: previous rates of 5, 12, 18, and 28 percent have now been simplified to 5 and 18 percent. Items previously taxed at 12 percent are now 5 percent, while most 18 percent items remain unchanged.
Nepali traders fear that cheaper Indian goods will directly affect prices in Nepal, intensifying competition and harming local industries. Open borders make informal trade, including smuggling, more likely, potentially reducing government revenue. Business leaders are urging the Nepali government to take immediate measures to control these effects.
According to business representatives, India’s GST cut will impact Nepal in three ways. First, India is Nepal’s largest trading partner, accounting for 65 percent of total trade. Second, roughly half of Nepal’s population lives in the Terai, near Indian cities, making cross-border shopping common. Third, GST is a value-added tax similar to Nepal’s VAT, applied at the consumer level, so Indian prices will drop and create a price gap across the border, encouraging Nepalis to buy from India.
Suyash Pyakurel, former president of Morang Industry Organization, noted that cheaper Indian goods will boost informal trade, with studies showing over 50 billion NPR worth of goods entering border areas unofficially. This could harm Nepal’s economy and domestic industries. Reduced Indian GST may also make Nepali products more expensive in India, further weakening export potential.
Kamalesh Agrawal, president of the Nepal Chamber of Commerce, highlighted that open borders will increase smuggling, citing sugar prices as an example: in Nepal, sugar costs 90–92 NPR, while in India it is 65 NPR. He suggested that Nepal urgently revise VAT and customs policies, reduce tariffs on essential goods, and provide incentives like tax relief or capital support to protect domestic industries.
The Morang Industry and Trade Association stressed the need to adjust Nepal’s tax policy to maintain competitiveness and curb informal trade. They recommended lower taxes on essential items, moderate taxes on middle-class goods, and higher taxes on luxury items. Businesses warned that failing to act now could have long-term negative effects on Nepal’s economy and industrial growth.
People’s News Monitoring Service
Login to add a comment