Tuesday, January 28, 2014

Gutkha, tobacco become potent revenue source

KATHMANDU, Jan 28: Revenue collection during the first six months of the current fiscal year from chewing tobacco and gutkha (mix of ingredients taken with betel leaf) has become a great example on how revenue collection can be enhanced if the tax net is widened to include areas prone to huge revenue leakage.

Total revenue, including excise duty, VAT and income tax, from chewing tobacco and gutkha shot up more than 12-fold to touch around one billion rupees during the first six months of the current fiscal year.

The government had raised only around Rs 80 million in revenue from gutkha and chewing tobacco during the same period last year.
Officials at the Inland Revenue Department (IRD) said excise duty alone raised up to Rs 800 million during the review period, significantly up compared to Rs 60 million reported raised during the same period last year.

The government had collected Rs 120 million and Rs 200 million in revenue from the gutkha and chewing tobacco business during fiscal year 2011/12 and 2012/13 respectively.
“It is a shining example of how we can boost revenue if we expand the revenue net to reach areas where widespread revenue leakage is reported. We are confident we can mobilize up to two billion rupees in revenue from chewing tobacco and gutkha if revenue collection continues is to go up at this pace until the end of the fiscal year,” Ram Mani Duwadi, deputy director general of IRD, told Republica on Monday.
He said the potentiality of increasing revenue from this sector very high as still large chuck of transaction is not coming into the tax system.
 Following the budget announcement, IRD had strictly enforced the use of excise duty stickers for gutkha and tobacco products. Before the budget also, IRD had introduced excise duty stickers on a trial basis from mid-April to mid-June.

“We formally introduced excise duty stickers for those products after witnessing the positive impact on revenue during the trial period,” added Duwadi.
Following reports of rampant leakage in revenue in gutkha and tobacco, the government consulted the producers and traders and introduced sticker use for transactions in those products.

The government has been levying excise duty of Rs 160 per kg and Rs 240 per kg for plain tobacco and tobacco with jarda incredient respectively. Similarly, Rs 275 per kg in excise duty has been fixed for gutkha products.

“We are surprised to find that one single business firm dealing with gutkha and tobacco has been paying over R 25 million per month as excise duty. We found many other firms contributing over Rs 10 million in excise duty,” added Duwadi.

Published on 2014-01-28 07:53:31

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