Registration of new gutkha factories halted

KATHMANDU, MAY 18 -

With gutkha factories mushrooming in Tarai towns, the government has decided to stop registration of new enterprises for the time being. The Industrial Promotion Board (IPB) announced the indefinite moratorium on Tuesday.

Gutkha is a mixture of crushed betel nuts, tobacco and various flavourings, and is chewed for its effect as a mild stimulant.

Meanwhile, the Inland Revenue Department (IRD) has made it mandatory for gutkha producers to affix an excise sticker on each packet from May 15 in a bid to control revenue leakage.

The IPB has also formed a taskforce led by Rishi Koirala, joint secretary of the Ministry of Industry, to study all aspects of the gutkha industry. The team will study the product’s possible health impacts, tax evasion, actual number of factories, consumption patterns in the country and export scenario, among others. The taskforce has been given two months to submit its report.

“The committee’s recommendation will shape the board’s decision whether new factories should be permitted to be established or not, and how they should be regulated and brought under the tax net, among other issues,” said Dhruba Rajbanshi, director general of the Department of Industry and member secretary of the IPB.

Indian gutkha producers have shifted their operations to border towns in Nepal after the Indian Supreme Court banned production of the stimulant in plastic packets in April 2011.

According to the IRD, only around 150 companies producing chewing tobacco have come under the tax net while hundreds of others are operating without paying taxes. However, figures released by the Industry Department show that 466 factories producing chewing tobacco have been registered while a few dozen have been running without government approval.  

“The way these factories have been proliferating, the tax administration does not have any clue about their number, nature, sales trends or volume of exports,” said Tanka Mani Sharma, director general of the department.

According to the Customs Department, gutkha produced in Nepal is being exported to the Middle East, Singapore, Malaysia and Uganda. Gutkha exports in the first five months were three times higher than the shipments during all of the last fiscal year.

Exports amounted to 361,000 tonnes worth Rs 367.1 million in the first five months of the current fiscal year. Nepal exported 126,000 tonnes of gutkha in the last fiscal year. However, revenue collection from gutkha exports has been very small. The government collected Rs 87,462 in taxes during this fiscal year.

Source: The Kathmandu Post