The latest decision is expected to lower Nepal´s import and export costs via the far eastern route, which sees movement of around three dozen trucks and containers everyday for trade purpose.
"India has finally agreed to stop collecting the tax on goods involved in Nepal´s overseas trade after diplomatic efforts of one year. The new development has paved the way for smooth movement of goods through the crucial route," Chandra Ghimire, Nepali Consul General in Kolkata, told Republica on Saturday.
Nepali traders had long been complaining about unauthorized collection of the tax by the southern neighbor that infringed on the bilateral transit treaty.
But after series of meetings with the state government of West Bengal, customs officials stopped collecting the tax from May 21, according to Ghimire.
The Silgudi-Jalpaigudi Development Authority had been collecting the tax to facilitate development of West Bengal. According to Ghimire, the tax amount ranged from IRs 50 and IRs 80 per small and big trucks, respectively.
This practice was violating the existing bilateral trade and transit treaties, affecting traders who were using the route to import and exports goods.
The Article-4 of Nepal-India Transit Treaty prevents Indian authorities from collecting any form of tax on goods traded between Nepal and third-countries.
Currently, India has designated 16 routes in West Bengal, Bihar, Jharkhanda and Uttar Pradesh for Nepal´s overseas trade.
"Though the amount collected by West Bengal in the name of development tax was not big, it had set a bad precedent. If other states had followed West Bengal and introduced similar tax then Nepali traders would have ended up paying hundreds of millions of rupees every year," Ghimire said.
Ghimire also informed that India has started upgrading the road along Panitanki-Phulbari-Banglabada route, responding to request made by Nepali consulate officials.
"It is now building a four-lane track upon our request. This is expected to address problems of traders who always complained about poorly maintained road," he said, informing, the work will complete within next one and half months.
Once the construction is complete, the cost of transporting goods is expected to go down significantly. This will also reduce the time of ferrying goods.
In another development, West Bengal has also banned unauthorized ´levy´ slapped on goods exported from and imported into Nepal.
"This will address problems of those facing hassles from different local groups," Ghimire said, adding, Nepal has also requested the Indian side to simplify quarantine process mainly for agro produces, establish internationally recognized testing lab and open a bank branch at customs point to facilitate traders.