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Govt slashes Petrol by Nu 10.29 a liter and diesel by Nu 7.75 from 11th Nov

The cabinet in a press conference on 10th November announced a drastic cut in the price of petrol and diesel after the government decided to pass on the full benefit of excise duty refund for fuel to the people.

With the introduction of the Goods and Services Tax (GST) by the Government of India (GoI) since 1st July 2017, all exports to Bhutan from India had become zero rated with no tax except for petrol and diesel, on which excise duty was being levied by the Indian government and then refunded to the Bhutanese government like before.

However, recently, the GoI also exempted the levy of excise duty on petrol and diesel.

The government had the option to increase domestic taxes to make up for the revenue loss from excise and also keep the fuel prices at the current rates.

However, the government has decided to pass on the full benefit of the excise duty refund on petrol and diesel coming to around Nu 1.514 bn a year to the Bhutanese public.

The exemption at source of excise duty on fuel imports will reduce on average the price of petrol by Nu. 10.29 per liter and diesel by Nu. 7.75 per liter, a reduction of about 17% and 14%, respectively.

To mark the auspicious 62nd Birth anniversary and honor His Majesty The Fourth Druk Gyalpo, the revised fuel prices shall come into effect from 11:11 AM, November 11, 2017.

The exemption of excise duty will impact the national revenue with the removal of Excise Duty Refund and reduced level of sales tax (ST) and green tax (GT) collection.  In terms of amount, the Royal Government will have to forego revenues of Nu. 1.514 billion in EDR, and about Nu. 94 Million in ST and GT collection.

table“Despite the significant loss of revenue to the national exchequer, the Royal Government has decided to pass on the full benefits of the excise exemption to the general public of Bhutan without imposing any additional taxes,” said the Foreign Minister Lyonpo Damcho Dorji who represented the Prime Minister as the acting Prime Minister.

Besides the import of other goods and services, fuel imports from India is a major import item and accounts for Nu.  7.369 billion worth of imports in 2016.

The Foreign Minister said that the drop in the fuel prices will stimulate the economy by lowering the cost of transportation that will result in a drop in prices for consumer and industrial goods across the board.

He said this will also enhance Bhutan’s competitiveness and productivity and will be a major stimulant to further supporting the strong economic growth that the country is enjoying.

The Home Minister requested that since the government is not imposing any taxes, the government appeals to all businesses to provide equivalent reductions in the prices of goods and services being provided to citizens.

The reduction in fuel price is expected to decrease the Consumer Price Index by around 0.74% which also means a decrease in inflation.

The government has instructed the relevant sector agencies to ensure that lowering of fuel price has desired effect across all sectors of the economy.

The Finance Minister Lyonpo Namgay Dorji said that after six months, the government will review and assess whether the benefits of reduction in price has been passed on to citizens, its impact on the economy and based on the review, additional measures will be taken, if required.

The Health Minister Lyonpo Tandin Wangchuk said that since petrol and diesel are the main drivers of the economy, a reduction of their prices constitutes the biggest economic stimulus ever provided by the government.

The reduction in fuel prices is expected to benefit the economy through increased economic activities by enhancing the economic growth by 0.18% in one year.

The health minister said that in the long run, the tax base is expected to expand increasing tax revenue to the government.

The cabinet said that all businesses are therefore, urged to make full use of the economic opportunities, comply with government rules and regulations and pay their fair share of taxes to contribute to the nation building efforts.

The cabinet said that the reduction in prices is also a gift from His Majesty The King to the people of Bhutan.

In response to a question on possible cross border pilferage the finance minister said that all relevant agencies have been asked to monitor strictly at border areas and if such things take place then the government will take a serious view of it and take necessary legal action.

The Minister for Information and Communication D.N Dhungyel said that the ministry will start its review of public transport prices from Monday and within a week or 10 days time come up with taxi and bus rates based on the reduced prices and other inputs. He said that the RSTA has a system of revising the prices downwards or upwards if there is a five percent or more change in fuel prices.

Therefore, a drop in transportation rates is expected. The RSTA does not control freight or truck rates but these too are expected to drop.

The government in 2016 got Nu 2.9 bn in total excise refund of which fuel composed around Nu 1.5 bn.

According to a source, the government took this step given its relatively comfortable financial position and the need to spread financial benefits in a more even manner among society, and at the same time generate growth and reduce prices.

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