The Finance Minister proposed to repeal section 56(1) of the Fiscal Incentives Act 2021. The section gives businesses a reduced customs duty rate of three per cent on permissible raw material and primary packaging material. These are manufacturing units which do not earn convertible currency from the export of their finished products.
Finance Minister Namgay Tshering said the section was redundant since it is covered by section 51 of the Fiscal Incentives Act. Section 51 says there shall be Sales Tax and Customs Duty exemptions on plant and machinery, raw material and packaging material for manufacturing units. Besides, access to convertible currency was being governed by the Foreign Exchange Rules & Regulations.
“As per the letter issued by the RMA, access to foreign exchange shall be governed by the Foreign Exchange Rules and Regulations as empowered by the RMA Act 2010 as opposed to the Fiscal Incentives Act of Bhutan,” said Lyonpo
Under the Act, manufacturing units have to earn in convertible currencies from the export of their finished products to get full Sales Tax and Customs Duty exemption on the import of raw materials from countries other than India.
However, the Royal Monetary Authority asked the finance ministry to dismiss the convertible currency earning requirement as a precondition for exemption in March this year.
“If taxes are exempted on the import of raw materials for industries, it will help in improving the economy of the country. Secondly, it can help enhance the export of goods with quality. Exemption of such taxes will enable people to get goods at cheaper rates. Such support measures can also help the growth of the private sector thereby reducing unemployment issues,” said Khatoed-Laya MP Tenzin.
It has been only about six months since the Act came into effect. The house forwarded the Bill to the Legislative Committee for review. The committee will present the bill next week.
Kinley Dem
Edited by Sangay Chezom
