Nepal asks India to remove Service Tax on the Ocean Freight

Delivery of Nepal-bound containers stuck at India’s Kolkata Port for over a week!
KHATMANDU: Nepal has urged India to remove the service tax on ocean freight, saying it goes against the bilateral transit treaty.

On January 16, the Container Corporation of India Limited (CONCOR) – a Ministry of Railways PSU that handles Nepal’s Railway freight from Kolkata Port, had informed Nepal about the decision and had been levying the 4.5 percent service tax since then.

Nepal has made a formal request to India to scrap a 4.5 per cent service tax on ocean freight costs which was imposed in accordance with a notice issued by the Revenue Department of India on January 12, the Kathmandu Post reported on Friday.

Officials at the Nepal Embassy in New Delhi said they have asked the Indian government to remove the tax as soon as possible because it goes against the spirit of the transit treaty signed between the two countries.

Although the tax had been introduced for Indian importers, Nepali traders are having to pay it too as they fully rely on Indian clearing agents to handle shipments from third countries unloaded at Indian ports, the report said.

These agents have been passing on the additional charge to Nepali importers, making third-country imports shipped through Indian ports costlier.

Ocean freight costs vary depending on the distance of the port where the shipment originates. Ocean freight costs from China to Kolkata for a 20-foot container ranges from $600 to $1,600, according to Nepali importers. Charges range from $3,700 to $4,500 for a 20-foot container originating in the US.

Since taxes are imposed on the freight costs, Nepal-bound goods unloaded at Indian ports have become costlier. “We have made a formal request to India, and they have assured us that they will address the issue as soon as possible,” said Krishna Hari Pushkar, Economic Minister at the Nepal Embassy in Delhi. He added that efforts were being made at multiple levels to resolve the problem.

Commerce Minister Romi Gauchan Thakali had also raised the issue with the Indian side during his visit to Delhi last week. This tax issue had emerged in 2005 too, and it was resolved after bilateral talks, the Post said.

Nepal has also requested India to remove the anti-dumping duty imposed on Nepali jute and jute products. India started levying an anti-dumping duty of $6.30 to $351.72 per tonne on jute and jute products imported from Nepal in the first week of January. The duty is valid for five years, the report said. The import-restrictive levy has been imposed on jute yarn and twine, Hessian fabric and jute sacking bags in ‘all forms and specifications’.

Foreign Minister Prakash Sharan Mahat had asked India’s Minister of State for External Affairs V.K. Singh and Finance Minister Arun Jaitly to resolve the problem when he was in Delhi two weeks ago.

Birgunj Chamber of Commerce & Industry points out delay in Delivery of Nepal-bound containers

Birgunj Chamber of Commerce and Industry (BCCI) has said around 1,000 Nepal-bound cargo containers have been stuck at India’s Kolkata Port for over a week.

Earlier, the Kolkata Port authority had informed Nepali importers that loading of Nepal-bound containers, which was halted due to congestion, would resume by last Monday. However, the work has yet to restart, forcing the importers to pay high detention charges to shipping  companies.

“Traders have been forced to pay around Rs10 million per day in detention charges,” said BCCI President Pradeep Kedia.

If an importer fails to send back the containers to Kolkata within 14 days of the shipment, the trader has to pay $35-60 a day in demurrage fees to shipping companies.

About 36,000 cargo containers come to Nepal from third countries through the Kolkata port every year on an average. Half of them enter the country through the Birgunj dry port, while the rest come through Bhairahawa, Biragnagar and Kakarvitta.

A team of Nepali businessmen are scheduled to visit Kolkata to hold talks with shipping agents on demurrage and detention charges. “We have plans to hold a meeting with shipping agents on December 20,” said Rajan Sharma, president of Nepal Freight Forwarders Association (NEFFA).

The team is led by Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Vice-president Dinesh Shrestha and represented by Birgunj Chambers, Biratnagar Chambers, and Neffa. Kedia said during their India trip, they would hold “serious” talks with officials of Indian customs in Kolkata.

Although shipments from Kolkata had increased after India relaxed its embargo on Nepal, the shipments have once again been halted for the past week.

Sharma said he had held talks with the officials of Container Corporation of India Ltd (CONCOR), the firm that handles railway freight to Nepal, and a director of Indian customs in Kolkata and requested them to resolve the problems at the earliest. “We are told the shipments would begin on January 11,” he said.

He said Nepali importers had been suffering due to “mismanagement of the railway service from both the CONCOR and Himalayan Terminal that operates the Birgunj dry port”. CONCOR is one of the shareholders of Himalayan Terminal.

As per the Railway Service Agreement between Nepal and India, CONCOR will handle Nepal-bound cargo through the Indian Railway.

Some railway racks carrying bulk cargo of MS billet, cooking oil, corn, and fly ash have arrived at the Dry Port, but containers have not come, said Kedia.

Administrative officer of Himalayan Terminal Ram Babu Sah claimed the shipments of Nepal-bound containers were affected by overcrowding at Kolkata port. “Containers of those who have paid the charges are coming to Nepal,” he said, claiming only 535 containers were stuck in Kolkata.

According to Laxman Basnet, executive director of Nepal Intermodal Transport Development Board, he was informed shipments of containers containing other goods had been delayed due to increased inflow of bulk cargo carrying fly ash, which is used in cement manufacturing.