The Office of the Consumer Protection (OCP) under the economic affairs ministry started monitoring whether the benefits of Goods and Services Tax (GST) are being passed down to the ultimate consumers last week.
Initially, the department will monitor the benefits on automobile trade and then shift to 15 essential commodities in the market.
The department is still compiling the reports which will then be submitted to the Prime Minister’s Office for action.
The team has so far visited vehicle showrooms and collected information on the challenges and benefits they have encountered post-GST. It is also compiling data on old vehicle stocks and incoming numbers.
The department aims to find changes in vehicle prices pre and post GST and how the consumers are benefitted. Dealers might keep larger profit margin, which is supposed to be passed on to the consumers therefore the team will reveal the percentage of benefits passed down.
“We are still compiling the data,” said the Chief Trade Officer from OCP, Gopal Pradhan.
The investigation will be conducted priority-wise based on the cost of the product. Higher cost commodities are prioritized first, said the Chief Trade Officer.
“Vehicles being high-end products, traders tend to keep large profit margins,” he said, “this needs to be monitored.”
The team will also start monitoring in the capital and other towns after completing the program in Phuentsholing.
Two months since the Indian government imposed GST and the Bhutanese are yet to feel tangible benefits of the tax reform. In fact, Bhutanese traders and consumers remain confused as prices of commodities have actually increased.
The Indian government had declared that exports from India are GST-exempt. Prices though have increased in wholesale stores, which has compelled retailers to increase theirs and ultimately consumers have been paying more. For instance, the price of rice has increased by up to Nu 45 per kg, according to a wholesaler.
A majority of trade in Phuentsholing has come to a standstill after GST due to limited import from India. Most of the shops remain out of stock for months. A system failure at Jaigaon land customs office exasperated Indian transporters who once blocked export from India to Bhutan. Lack of required equipment and manpower at the office stalled vehicular movement to Phuentsholing leaving more than 200 trucks stranded at Jaigaon.
However, experts are of the view that prices should be comparatively cheaper than prices in Jaigaon.
A consultant, Naman Siddarth of IMS Taxoservices working with Association of Bhutanese Industries and Bhutan Chamber of Commerce and Industries said that prices will fall in the Bhutanese market. The export invoice should be declared in the land customs office at Jaigaon where GST will be exempt. Any wholesale dealer should now sell below Maximum Retail Price (MRP) as it contains GST component. “The price of commodities should be cheaper by up to 30% in Phuentsholing than in Jaigaon,” he said.
To avoid taxes, he said that the government needs to block invoices coming to Bhutan unless the same is termed as export invoice under GST rules. “Banks can also play an important role in this as the payment is routed through the same based on the invoicing,” he said.
Naman Siddarth further said that if an Indian dealer, wholesaler or distributor supplies goods to Bhutan, it shall be zero-rated and the complete tax paid by him to the manufacturers shall be refunded to him.
Meanwhile, Prime Minister Dasho Tshering Tobgay, recently also directed traders to pass GST benefits to consumers. “Phuentsholing is the first town to see GST impact. GST benefits must be passed on to the ultimate consumers,” he said.
Krishna Ghalley from Phuentsholing