The Bhutan government calculated Nu 14 bn as the loss of revenue in the 12th plan due to the doing away of the refundable excise duty by India under their new Goods and Services Tax (GST) regime.
However, industries say GST will also affect the profit margins of Bhutanese industries and hence tax revenue for the government.
This they say is due to the very structure of GST designed to make Indian exports cheaper and imports from all countries, including Bhutan, more expensive and also due to its implementation issues in India from 1st July 2017.
The Vice President of the Association of Bhutanese Industries (ABI) Chimi Norbu who also owns a Ferro Silicon factory said, “The revenue for the government from industries will definitely drop. As of now people have not felt the full effect as they want to keep running things but by the end of the year when they start compiling their balance sheets they will find a drop in revenue.”
He gave one example of the affected industry of cement which due to GST has become more expensive to export to India. Chimi said to stay competitive the cement industry had to immediately drop prices by around Nu 600 per metric tonne.
Other industries have also had to cope by dropping their prices and as a result have a smaller margin of profit.