The Indian move, which came just ahead of Dashain festival, has brought exports of popular brands like John Players, Peter England and D J & G to a grinding halt. [break]
Uday Raj Pandey, the vice president of Garment Association Nepal (GAN), said the imposition of duty has left some Rs 100 million worth of exports stranded at the customs as well as in the warehouses of the manufacturers. To further worsen the situation, India is imposing the duty over the maximum retail price (MRP) instead of invoice value of the export items -- something that goes against the international practice of taxation. Countries across the world impose duty on ex-factory price. Few impose duty on cost-insurance-freight (CIF) rate.
“Duty on MRP was never heard of in other countries and is simply unacceptable,” said Pandey.
Exporters lambasted such practice also because MRP, being the negotiable retail price, stands three-fold of invoice value. So, when duty is imposed over it, the actual tax burden for the traders comes in a range of 8 to 10 percent.
“It has sharply shrunk the profit return. Hence, the Indian importers have almost stopped accepting the delivery,” said an official of Alina Garment that exports D J & G brand of garment to Big Bazar, an Indian retail chain.
Moreover, the new impediment to export has come just ahead of Dipawali, which is the major business season for them. During the season, GAN estimates the export to cross over Rs 200 million a month. On normal days, monthly garment exports to India hover around Rs 100 million.
However, this is not the first time that India has imposed CVD on MRP. It had imposed the duty on similar style some one-and-a-half years ago. However, it revoked the decision following the request from the highest political level from Nepal.
Given that the new duty has come at a time when Nepal and India are yet to sign revised bilateral trade treaty, which provides special non-tariff preferences for Nepal, concerned traders expressed serious doubt over the intention of India on supporting bilateral trade.
However, Commerce Secretary Purushottam Ojha debunked such doubts. He said the ministry has already drawn the matter to the Indian government´s notice.
“We expect India to revoke the duty soon,” he told myrepublica.com.
milan@myrepublica.com
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