The Ministry of Finance (MoF) in a notification issued yesterday said that all books imported during 2015 will be exempted from both customs duty and sales tax.
The notification said that this was being done to encourage Bhutanese to read especially in the context of the National Reading Year 2015.
Earlier 11 book stores in Thimphu wrote to the Prime Minister informing the government about a 20 percent customs duty for books that were imported from India but printed in another country. This was in addition to the 5 percent sales tax they were already paying.
This was even though the Indian importers had already paid the necessary tax on the books while importing it into India.
Given that Bhutan is only a small market the big Indian branches of the International book companies did not send the tax details and receipts to the Bhutanese buyers. The Department of Revenue and Customs which was already doing enhanced checks following an Anti Corruption Commission (ACC) investigation in Phuentsholing decided to levy an additional 20 percent customs tax on the books.
The notification from the MoF said that imported books are subject to 20 percent customs duty and a 5 percent sales tax as per the Bhutan Trade Classification, Bhutan Sales Tax Schedule and Customs Tariff.
It said that Custom duty is exempted on Indian origin goods.
The notification explained that customs duty on books is now a new tax and has been levied even in the past. It said that there were not many instances of customs duty being levied on the import of books from India as the customs control measures at the operational level is managed on risk assessment basis due to the large volume of imports and the lack of space.
This was why detailed physical verification of books is not carried out regularly as books are considered as low risk products.
According to the notification the MoF has exempted all taxes in keeping with authority vested under Part 1, Chapter 2 Section 3.2 and Part II, Chapter 3 section 5.2 of the Sales Tax, Customs and Excise Act of Bhutan 2000.
Earlier after the appeal from the bookstores the Prime Minister Lyonchhen Tshering Tobgay personally stepped in and has asked the Ministry of Finance for a report on the issue.
Lyonchhen had said that while the government is trying to promote literacy and education this decision to tax books couldn’t have come at a worse time.
He had said that the government is eager to remove no customs tax as the government’s priority is the National Reading Year.
The PM had said that even the Finance Ministry had not been made aware of this decision to tax books in the National Reading Year.
It was found that the Department of Revenue and Customs (DRC) under the Ministry of Finance had started charging additional taxes on the books from earlier this year.
The PM had said that policy decisions and especially on what items to tax are the prerogative of the elected heads and any bureaucrat taking such decisions should always consult the government.
Bookstore owners said that the books are purchased from Indian distributors and as the books are priced in INR it is not viable for book stores in India to sell the books at Indian Maximum Retail Price (MRP) while paying the international Customs Duty and Sales Tax.
The book stores pointed out that simple fact that the MRP was Indian showed that the book sellers were not trying to import in books from third country on which no taxes had been paid.