Following Nepal government’s request, the Indian government has removed 4.5 service tax imposed on ocean freight.

Although the tax was meant for India’s importers, the provision also affected Nepali traders as Nepal relies on Indian clearing agents for the management of goods imported from third countries that land at Indian ports.

“We have received information that the Indian government has decided not to levy the tax in the case of Nepal,” said Eknarayan Aryal, Consul General in Kolkata, adding the decision comes into effect immediately.

Article 11 of the World Trade Organisation’s Trade Facilitation Agreement states: “Traffic in transit shall not be conditioned upon the collection of any fees or charges imposed in respect of transit, except the charges of transportation or those commensurate with administrative expenses entailed by transit or with the cost of services rendered.”

Indian officials have conveyed they were not aware that such a decision would impact Nepal and Bhutan.

On January 16, the Container Corporation of India Limited (CONCOR), an Indian government undertaking that handles Nepal’s railway freight from Kolkata port, had informed Nepal about the decision and had been levying 4.5 percent service tax on ocean freight ever since.

Ocean freight costs vary depending on the distance of the country from where goods are imported. For an instance, the ocean freight cost to ferry every 20-foot container from China to Kolkata ranges from $600 to $1,600, according to Sharma. This cost ranges from $3,700 to $4,500 per 20-foot container if goods are shipped from the US.

Nepal has also requested India to remove 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.