Nepali Government Eases Duty, Tax to Curb Inflation

Nepali government has cut import duty and Agricultural Reform Fee on raw materials for the edible oils industry and also pledged 50 percent value added tax (VAT) refund, aiming to quell a sharp rise in prices that has been exerting inflationary pressure.

According to Sunday's myrepublica.com report, the government has also substantially reduced import tariff for equipment used in research and development by pharmaceutical companies, in a bid to support capacity building by domestic producers of medicines.

The duties were slashed recently through a cabinet decision and the new rates have already come into effect. "With the cut in duty, we expect the prices of edible oil and vegetable ghee to come down, " a source told myrepublica.com.

Going by the new rates, manufacturers can now import soybean, groundnut and sunflower seed, which are raw materials for widely consumed edible oils in the country, against an Agricultural Reform Fee of 1.6 percent, a mere 20 percent of what they were otherwise required to pay.

Previously, the government was imposing 8 percent Agricultural Reform Fee on such imports.

Apart from seeds, the government has also halved import duty on raw soybean oil and raw sunflower oil and also raw palm oil used in manufacturing vegetable ghee, to 2.5 percent from 5 percent.

On top of the tax cut, manufacturers of mustard oil, other oils and vegetable ghee will enjoy 50 percent VAT refund against their sales.

Under existing law, the government can lower duty and taxes on its own. But it needs permission from parliament to raise them. Because of this provision the government is mulling over raising through ordinance the import duty on gold and some other products, which have been fueling the trade deficit.