West Bengal slaps tax on Nepali tea

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KATHMANDU, Aug 16 - In what can be called a move unfavorable to the Nepalese tea manufacturers, the West Bengal government has clamped 20 per cent luxury tax on the sales of tea not manufactured in India.

Nepalese tea has faced the direct brunt of the Bengal government’s decision. The tax was slapped in accordance to the new amendment to the West Bengal Luxury Tax Act, 1994, which was enforced from August 1.

Nepalese tea manufacturers are vexed that a commodity like tea has been slapped with luxury tax. Says Suraj Vaidhya, vice chairman of Himalayan Orthodox Tea Producers Association, "It is surprising that the Bengal government clamped luxury tax on such a daily commodity like tea. We have communicated with the Indian Embassy for more clarity."

Following the West Bengal move, Indian traders have begun canceling their buying orders with Nepalese tea entrepreneurs, whose tea would no more be able to compete with the Indian tea.

Amongst the Bengal tea dealers who have scrapped their previously placed buying orders include Doodli Brothers and Camilla International. In separate letters sent to their respective sellers, both companies have said that Nepali tea can compete no more in the Bengal market.

Entrepreneurs say that latest decision comes in contravention to the spirit of the duty free market access facility enjoyed by Nepal under the aegis of the Nepal-India Trade Treaty, first signed in 1991 and later modified in 1996. "The inclusion of Nepalese tea under the luxury tax net has no basis," says Vaidhya.

The decision to tax Nepalese tea comes at a time when Nepalese tea manufacturers were demanding with the West Bengal government for the inclusion of Nepalese tea in the Calcutta auction.

Nepali tea producers claim the present decision was taken to obstruct Nepali tea producers from participating in Indian tea auctions. Darjeeling tea producers, despite the Indian central government’s directives to the Tea Board of India to allow Nepali tea to participate in Calcutta auctions, are fighting tooth and nail to prevent Nepal’s entry

"All chances of Nepal’s access to the Calcutta auction now has gone down the drains," says tea entrepreneur Krishna Prasain.

Nepalese tea producers claim that West Bengal’s move was to discourage sales of Nepalese tea in the Indian markets. Nepal, with bushes younger than Darjeeling and sharing similar climatic conditions, is widely believed to produce tea better in taste and fragrance than the famous Darjeeling tea.

This is not the first time that Nepalese tea has faced hard times. At a time when Nepali tea entrepreneurs were trying hard to establish their identity as a high quality tea producer on the international markets, Indian media reports had claimed that tea produced in Nepal was grown from Darjeeling clones. The claim had taken the domestic tea industry by storm.

Nepal presently produces about 500,000 kg high quality orthodox tea per annum, over 95 per cent of which is exported, more than half of the total exports to India. Darjeeling then exported the processed tea to international markets under the famous Darjeeling logo.

Rest of the products that the luxury tax has brought under its net include garments, confectioneries, crockery, cosmetics, among others which are not manufactured in India.

Trade Treaty should be renewed: Shrestha

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KATHMANDU, Aug 16 - Rabi Bhakta Shrestha, President of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has stressed that the Nepal- India Trade Treaty 1996 should be renewed in the present form as the treaty has been beneficial for both the countries in expanding their bilateral trade.

Speaking at the inaugural session of 26th Annual General Meeting (AGM) of Nepal Foreign Trade Association (NFTA) here today, President Shrestha welcomed the proposed dialogue between the government and the Maoists aimed at solving the five and half years long insurgency. He said that the Federation is ready to extend best possible support to make the dialogue successful.

Referring to the anti-liquor campaign being launched by Maoists affiliated women’s organization, he said that the demand of total ban on the production, distribution and sale of liquor can badly affect breweries and distilleries, which in turn would affect the national economy.

But expressed satisfaction over ongoing negotiation between the government and All Nepal Women’s Association (Revolutionary) to solve the problem and expressed the hope that the outcome would be fruitful.

However, he flayed some recent activities of revolutionary trade union as they have affected some carpet and garment factories.

Rajesh Kaji Shrestha, President of Nepal Chamber of Commerce (NCC) warned that shrinking imports in the recent months can hit not only government revenue but also could squeeze employment opportunities. He also expressed dissatisfaction over the government’s failure to incorporate some recommendations put forward by the chamber in the current budget.

He also opined that the strong Labor Act has badly hit the inflow of foreign investments and urged the government to amend the act to attract more foreign investments.

Lok Manya Golchha, President of NFTA said that the deteriorating law and order situation, frequent bandhs and strikes have disturbed the business environment. He warned that if such situation persists, it would drain out investment. "The shrinking investment can jeopardize government’s efforts to fight against poverty by generating employment opportunities through increased investments," he said.

He also demanded that the Association should be given authority to issue Certificate of Origin.

Satish Kumar, General Secretary of the Association highlighted various activities of the association in expanding Nepal’s foreign trade and the association also suggested the government to follow various measures to sort out the problems of foreign trade.

Retirement income tax creates confusion

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KATHMANDU, Aug 16 - A new provision of levying tax on retirement income in the proposed Income Tax Bill 2001, which aims to bring all income generating activities under the tax net, has created confusion among employees.

The bill, which is presently awaiting approval from the parliament, has a provision to tax retirement income at the flat rate of 6 per cent. The bill once passed will be enacted as the Income Tax Act 2001.

The impact of such provision is already beginning to surface as most bank employees and those of the corporations are bewildered over how the actual implementation of the new retirement taxation provision would be carried out.

With the confusion swelling, more than 700 employees of the central bank are demanding the withdrawal of the amount from the welfare fund up to the limit. The sources at Nepal Food Corporation informed The Kathmandu Post that due to rumor, 43 employees of the Corporation has retired through golden handshake.

Vidyadhar Mallik, Director General at the Inland Revenue Department, informed The Kathmandu Post that the provision is not retrospective in nature. Therefore, the income deposited in the retirement fund in back-date is not taxable.

Saying that the present Income Tax Act treats equally to all incomes that fall under the taxable income DG Mallik added "The motive of new income is to bring all taxable income under the net irrespective of their source." However, he stressed that the new income tax act has provisioned some packages especially beneficial to the employees.

The provision of tax retirement income is introduced for the first time and the bill provides some better facilities to the employees. As per the provisions, Rs 500,000 or half of total retirement income, whichever is higher as received by the employees would be tax deductible.

On the remaining retirement income, employees are entitled to receive further subsidy in the form of deduction of their contribution. And finally, family exemption limit is also deductible before determining taxable retirement income.

With the enforcement of the new provision, the total contribution of an employee to the provident fund is not taxable. This leads to tax on the interest earned from such deposits at a minimum rate of six per cent. The pension earner, who would be treated as regular income earner, will be taxed as a normal individual.

"With the exemptions and deductions provided on the retirement income, the actual tax to be paid will be very nominal for a general employee." says DG Mallik.