Budget sees scope in baby food to raise funds to fill revenue gap

Published On: June 5, 2020 07:12 PM NPT By: Republica  | @RepublicaNepal

KATHMANDU, June 5: Although the government almost every year revises the customs duty and excise duty on alcohol to collect more revenue, the budget for 2020/21 has surprisingly kept the tax rates on the conspicuous goods unchanged despite the government falling in pressure to manage the financial resources to manage the expenditures.

The budget this year has drawn criticism also for revising taxes on the import of baby feed, chocolates and electric vehicles. It has reduced the customs duty on the imported chocolates while the duty on the powder milk used in baby food has been increased by multifold. The government that often talks about facilitating the use of electric vehicles however has massively increased the taxes on the import of the environment-friendly automobiles.   

The government charges excise duty on alcohol between Rs 370 and Rs 1,325 a liter depending on the percentage of alcohol in the beverage. Based on the rate of the indirect tax defined by the Finance Act of two successive years - 2019 and 2020 - the government is found to have kept the excise duty constant. For example, the excise duty on whisky with strength 25 UP (42.8% of alcohol) stands at Rs 990 per liter.  According to the Department of Customs (DoC), customs duty is charged up to Rs 1,200 per liter on imported alcoholic beverages.

With only one and a half months left for the completion of the fiscal year, the government has collected mere 56% of the targeted revenue of Rs 1.11 trillion, creating excess pressure on the government to manage necessary financial resources. But the government has considered increasing tax on baby food to fill the resource gap.    

The DoC records show that until last year, all the imported baby food under all categories needed to pay five percent customs duty. The budget this time has divided the powder milk in two categories — skimmed milk for babies under age of six years on which five percent duty has been levied while on all the rest of the baby food, 40 percent duty has been imposed.          

Finance Minister Khatiwada has been heavily criticized for his budget policy this time, mainly his alleged favor to Vishal Group. The budget has increased the customs duty of electric vehicles from 30 to 80 percent and excise duty from five percent to 80 percent, for which Khatiwada has been blamed for benefitting the particular business group.

The budget has also revised the customs duty on cocoa mixed chocolates from 40 percent to 30 percent. Vishal group is reported to hold around 60 percent market share in this type of imported chocolates. However, the duty on sugar-based chocolates has been kept unchanged at 40 percent.

Officials of the finance ministry declined to comment on the revised tax rates when Republica approached them for their feedback. 

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