Fer­rosil­i­con in­dus­tries in the dark about GST im­pact

Re­sult­ing in pend­ing con­sign­ments to be ex­ported

Business Bhutan - - Front Page - Kr­ishna Ghal­ley from Phuentshol­ing

Most fer­rosil­i­con in­dus­tries are spec­u­lat­ing how the im­po­si­tion of Goods and Ser­vices Tax (GST) would im­pact them.

With­out con­crete knowl­edge on the im­pli­ca­tions, they are won­der­ing how ex­port of their prod­uct will be af­fected post-GST. The In­dian govern­ment since July 8 im­posed 5-18% GST on the ex­port of raw ma­te­ri­als from In­dia.

Most of the raw ma­te­ri­als for fer­rosil­i­con

in­dus­tries fall un­der 5% GST. How­ever, since taxes are also levied in the In­dian states, these in­dus­tries are in a state of con­fu­sion.

“The In­dian govern­ment is im­pos­ing one tax slab but tax paid to the state gov­ern­ments is con­fus­ing us. We can­not say what this means for us un­til the ma­te­ri­als reach us,” said Se­nior Gen­eral Man­ager (Pur­chase) of Bhutan Ferro Al­loys Lim­ited (BFAL), Nakphay Wangchuk.

The state govern­ment still levies cess when these in­dus­tries pro­cure the ma­te­ri­als. A cess im­posed by the cen­tral govern­ment is a tax on tax, levied by the govern­ment for a spe­cific pur­pose. Gen­er­ally, cess is ex­pected to be levied till the time the govern­ment gets enough money for that pur­pose.

For ex­am­ple, a cess for fi­nanc­ing pri­mary ed­u­ca­tion – the ed­u­ca­tion cess (which is im­posed on all cen­tral govern­ment taxes) is to be spent only for fi­nanc­ing pri­mary ed­u­ca­tion and not for any other pur­poses.

Since July, BFAL has not yet re­ceived any raw ma­te­rial sup­plies. Also, not a sin­gle con­sign­ment has moved out of the coun­try since then. BFAL’s Man­ager said that the com­pany is yet to see changes in the prices of raw ma­te­ri­als. “They have not said any­thing and we are also wait­ing,” he said.

But some sup­pli­ers have sent GST code, which they will be us­ing in their bills to claim re­fund. The GST law states that GST is re­fund­able on ex­ported goods au­then­ti­cat­ing the prod­ucts have reached the des­ti­na­tion. The pos­si­ble im­pacts are still un­der spec­u­la­tion and com­pa­nies are plan­ning to act once the im­pacts are ac­tu­ally felt.

The in­dus­tries pay 10% Bhutan Sales Tax (BST) for the im­port of goods from other coun­tries. If re­fund of GST is ap­plied to raw ma­te­ri­als, prices of fin­ished prod­ucts are ex­pected to re­main the same. Only trans­porta­tion costs might be af­fected.

Due to GST, some com­pa­nies have not ex­ported a sin­gle con­sign­ment till now. Some con­sign­ments are still stranded in Jaigaon due to tech­ni­cal is­sues. Ugyen Ferro Al­loys has also not sent a sin­gle con­sign­ment since July 1. The com­pany is wait­ing for the cus­toms at Jaigaon to set­tle. “Oth­er­wise, there are chances of our con­sign­ments re­main­ing stranded on the way,” said Com­mer­cial Gen­eral Man­ager Manush Sharma.

Au­thor­i­ties said that to pro­mote smooth trade flow, all the stake­hold­ers need to be aware and ad­here to GST pro­vi­sions start­ing from man­u­fac­turer till con­sumer. Also, the cus­toms of­fi­cials and trans­porters need to be ready to com­plete for­mal­i­ties man­dated in the sys­tem to pro­mote trade. Ab­sence of GST reg­is­tra­tion num­bers for the trans­porters is an­other chal­lenge for the in­dus­tries.

Some in­dus­tries said they are observing closely and will know the full im­pli­ca­tions of GST after a few months. Druk Ferro Al­loys Lim­ited’s Ac­counts Of­fi­cer Giri Dhari Saha said they have not ex­ported any con­sign­ments. “We are wait­ing to see how GST would im­pact the prices of our im­ports and ex­ports.”

Sim­i­larly, Bhutan Sil­i­con Met­als Pri­vate Lim­ited has kept their con­sign­ments pend­ing post July. “We might take some time to ex­port after ev­ery­thing is set­tled,” Mar­ket­ing Man­ager Samdup Dorji said.

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