The recently implemented Indian Goods and Services Tax (GST) have slowed Bhutan’s cement export to India.
Cement has a 28 percent GST that the Indian buyers would have to bear. This has left Bhutanese manufacturers to either consider a price revision or face drop in sales in the Indian market.
Penden Cement Authority Limited’s (PCAL) sales head Tashi Drukpa said Indian cement price would drop and become more marketable in areas where Bhutanese cement is currently sold.
“Taxes such as VAT, excise duty and other taxes that constitute about 30 to 33 percent will be totally off for Indian manufacturers,” he said, adding that this was an advantage to them.
After the GST was implemented, the price of Indian Premium Brand cement on Friday has decreased to Rs 345 from Rs 365.
Dalmia cement is another competitor in India. Its price has also dropped by Rs 15 a bag. A bag of Dalmia cement is Rs 330 and Rs 336 depending on the packing quality.
Considering transportation cost and GST, Tashi Drukpa said that Penden cement price would reach Rs 377 in the Indian market.
If the current factory price of Nu 5,617.50 per metric tonne (MT) is considered, Penden would have to slash its rate by at least Rs 940 a MT, Tashi Drukpa said.
Meanwhile, in the case of Penden cement, the quality and goodwill can play a key factor in price determination, PCAL officials said.
But due to a broken gearbox, PCAL has already seen a new low in production. Starting June 18, even before the GST regime came into effect, it stopped export to India.
Penden recorded an impressive climb in cement export in 2016 compared to the previous year. It exported 227,390MT cement in 2016 as opposed to 212,090MT in 2015.
Export comprises almost 60 percent of business for PCAL.
Dungsam Cement Corporation Limited (DCCL) is also hit with the GST regime.
Its marketing head, Tshering Dorji, said, that they are not very clear about the implications. “There is nothing clear cut,” he said.
An official from Lhaki cement said GST would impact Bhutanese cement market in India.
However, given the India-Bhutan trade ties, cement manufacturers are hopeful of certain special exemptions in their product.