Goods and Services Tax (GST) is an Indian tax reform policy affecting Bhutan primarily due to implementation issues from India.
GST is posing a lot of headaches for Bhutan’s economy and particularly it’s industrial and export base.
We already knew that GST is designed among other things by India to boost its exports, and so as a result it becomes cheaper to import from India and more expensive to export there.
Bhutan’s industrial community is not closing shop, but this is affecting their profit margins which were higher before due to higher tax differentials. The request to the Indian side is to consider levying GST at the point of resale for goods exported by Bhutan.
However, the biggest headache at the moment for Bhutanese importers and exporters of all hues is the inefficient implementation of GST in the Jaigaon customs office, where understaffing and lack of equipment and good internet led to hundreds of trucks lining up.
Even with recent improvements it still takes a long time to clear consignments, slowing down business for Bhutan.
Worse, the inability to upload manual GST bills online on time may lead to major Indian suppliers applying GST to Bhutan for future exports making them more expensive or simply not doing business with Bhutan.
GST has unraveled a host of implementation issues and along with ‘demonetization’ it is slowing down the Indian economy.
However, it should have at least occurred to tax authorities in India to ensure that trade with neighboring countries does not suffer as a result. The sheer level of incompetence in Jaigaon is not good for any side.
In the true South Asian fashion only incremental steps have been taken to handle the crisis at the important economic border between the two nations. However, it is high time that authorities on both sides take a more urgent view of the matter and take more effective and long term steps to resolve the issue before it goes out of control.
The hardest thing to understand in the world is the income tax.