India’s Service Tax, Upcoming GST and Loss to Nepal
Nepal has always been a nation with limited technical man-power.
You go to any major company, and most of the employees or the technical
knowledge required is outsourced to mostly India or some foreign country.
I have been into Business now for 6 years in Nepal, and know the
problems to do business in and out. There are authorities in Nepal, but they don’t
have intensions to help the business doing person. They would raid and extract
money, they would ask us to follow rules, and regulations despite facing all
the hardships of Doing Business in Nepal, but they would never seek our opinion
to improve the business conditions, nor would they feel the pain of the
business community.
Anyways, the topic for the day is Service Tax on services
availed by Nepalese in Nepal from an Indian company or person. In India, any
service provider has to charge 15% service tax (in total) of the basic value. So,
If he provides service of say Rs 100 to any person in India, he would be
charging Rs 115 INR.
Like Goods, whose taxes are exempted when exported to Nepal, we
Nepalese are facing a huge loss in the economy due to the nature of Hiring
service provider from Nepal. Indian Firms, who deal with Nepal, can’t bill for
services provided in Nepal in US dollars, as RBI restricts Nepal and Bhutan to
deal in US Dollars to Nepal. And Indian Service Tax act has made it mandatory
to charge Service tax on all the services which they charge in Indian
Currency.
Service
tax charged in India is exempted if all the 4 clauses are met:
-Service
provider in India Service
- Recipient
outside India
-
Place of supply of service outside India
- Payment
received by supplier of service in convertible foreign exchange
Since
from Nepal, the payment that we send to India is in INR (Indian currency and
not in Foreign currency) we are liable to pay the service tax of India.
We
Nepalese face the dual taxes on services in Nepal, as the Laws of Value Added
Tax of Nepal says that any services taken from anywhere would be taxed 13% VAT
extra.
So,
we Nepalese are facing a case, when we are paying, Indian Service tax, and then
Nepalese VAT on the services we take from India. This clearly means, that we are
only paying Rs 129.95 INR or that is 30% in Taxes to Nepal and Indian
Government for Rs 100’s service.
Nepalese if at all should pay only 13% VAT on the services, and
should argue with the Indian Government to remove the Service charges being
charged to Nepal.
I wonder that, why despite having FNCCI, and so many financial
bodies, our Business community is not able to raise the issue and get it
sorted.
We have the case of Paying Service taxes on Indian Truck
Freights, railway demurrage to Indian Railways, and many others in Taxes, which
just go un-noticed, and are just paid, because there is no follow up, and there
is no one from Nepal Government to bother about. Millions of Rupees of Nepalese
businesses is just being lost just because the Government Officials don't have
sharp ears to listen to the problem of the Business community, and neither do
they have the will power to help the business people.
I
was very optimistic that the Upcoming GST in India, which is scheduled to start
from July 1st, 2017 would take care of these issues.
GST
is a same tax rate for Goods and Services (Goods and Service tax). Most of the
developed and developing countries in the world have one common Tax rate for
Goods and Services. India would too adopt this after a long political
bargaining.
But
for Nepal, the GST law draft for services export to Nepal has same clause, as
it is in Service Taxes Export to Nepal. This clearly Implies that, After GST
too, Nepalese service takers from India will have to pay 18% (currently 15%)
tax for Service, just because, we need to pay the same in Indian Currency.
Recently
we had a issue, when Indian Government implied a 4.5% Service tax on Containers
being shipped to Nepal. When FNCCI lobbied with the Nepalese government, and
then the Indian Government, the issue was resolved within no time.
The
problem with no voice against Service tax issue or playing with the regulation,
is the existing Informal monetary system. When you need to pay 30% tax (dual
tax) on services acquired, then why should the payment be made through the
legal channels? People rather choose methods such as Hawala which costs 2-3%
only. Also, most of the service imports in Nepal is against some goods only,
and cost of the service is included in the Goods itself.
With
so many developments happening in Nepal, we need a lot of Good consultancy in
Nepal. We surely lack expertise in a lot of issues, as we have never been a self-sufficient
country in Education and technical know-how. Be it be on Good designing of
Roads, Bridges, Hydro projects, etc or technical know-how in factory
establishment, energy projects, etc., we need good technical expert advice from
Good Developing country. If we compare foreign countries, the best and most cost-effective
expertise, that we can avail is from India.
Nepal
has already done a good work, of nullifying all the Goods taxes that are levied
on the Goods manufactured in India, and imported to Nepal. We need to now raise
strong voice to make the Service tax on exports of services to Nepal, and Now,
GST on services export to Nepal to be Charged 0%.
Hope
that the article raises the issue somehow in the Business Community, FNCCI, and
our government economic corridors, and we are able to raise this issue to
Indian Government.
No comments:
Post a Comment