Reducing VAT in export-import impossible

KATHMANDU, FEB 20: 

The reduction of Value Added Tax in the export-import sector as demanded by traders is impossible, according to the Department of Customs.

It will have an adverse impact on overall revenue collection if the current VAT ceiling is reduced, said director general at the department Rana Bahadur Shrestha. “It is not fair to reduce VAT compliance of goods imported for profit.” “Commercial fraud at customs points will be rampant unless the government reduces the current VAT rate,” chairman of Nepal-China Chamber of Commerce and Industry Rajesh Kazi Shrestha had claimed recently.

However, director general Shrestha refuted the claim saying that the department is planning to review the valuation of some 166,000 goods. The department will make a strong database of those goods to control the existing trend of under-valuation, according to him.

The department is preparing to re-valuate those goods whose valuation is much lower than the expected valuation such as groceries, garments, cosmetics and electronics, according to him.

The introduction of Letter of Credit (LC) as a mode of payment will also help reduce commercial frauds from different customs points, opined Shrestha. 

Traders have been using LC as a mode of payment for trade with India and other third countries, he said. However, trade with China is dependent on Telegraphic Transfer (TT) and draft till date.

The government should be serious about introducing the LC mode of payment for trade with China, according to him. The Chinese government may introduce LC as a mode of payment after construction of the railway from Khasa to Rasuwa, according to director general at the Department of Customs Shrestha.

The volume of trade will increase after the construction of the railway which may encourage the Chinese government to adopt Letter of Credit as a mode of payment. 

However, it may be too late to wait for the construction of the railway to introduce LC as a mode of payment with China because TT and draft system have been the reason for numerous customs frauds, he said.

Source: THT