Kathmandu : In a surprise move, Nepal’s government has removed Chyawanprash – a health tonic made of herbs – from the list of ayurvedic drugs and slapped value-added tax (VAT) on it.
The budget tabled by Finance Minister Ram Sharan Mahat last month has branded Chyawanparesh, manufactured in Nepal by major companies as well as individual ayurvedic practitioners, a luxury item that will now carry 13 percent VAT.
In addition, Indian manufacturers like Dabur Nepal, Baidyanath and Zandu will also probably have to pay increased customs duty. Now that Chyawanprash is no longer considered an ayurvedic brew in Nepal, its harmonic code – the international code that fixes the status of a product worldwide — is also being changed.
It means Chyawanprash will now be subject to higher customs duty as well. Manufacturers fear an additional tax of around 20 percent, which includes 13 percent VAT.
Even if some companies try to soften the blow to the customer by absorbing a percentage of the rise, there is bound to be a substantial increase in the cost price, which could make it unaffordable for the common man in Nepal.
The government diktat comes after Dabur Nepal, Nepal’s largest exporter, went to the Supreme Court, questioning a decision by the department of taxation to impose VAT on Dabur Chyawanparesh alone, especially as the product had received a certificate from Nepal’s Department of Drugs Administration (DDA), recognising the tonic as an ayurvedic drug.
Various brands of Chyawanprash collectively have a market of Nepali Rs.200-250 million in Nepal. Dabur Nepal leads with over 30 percent of the sales.
“We will ask the DDA to advise us,” said Udayan Ganguly, Dabur Nepal managing director.
If Dabur Chyawanprash is subjected to VAT, Dabur Nepal will ask DDA to derecognise it as an ayurvedic drug as recognised drug manufacturers have to submit themselves to various monitoring. Even their advertisements have to be approved by DDA.
The exact structure of the new taxes, including customs duty, will be clear only at the end of this month when Chyawanprash importers bring in fresh stocks from India. Only after the customs officials put on the new harmonic code stickers will it be known how much the enhanced duty is.
The finance bill has also indicated it will pay duty refunds to import-export companies in mid-January. Dabur Nepal’s duty refund dues are expected to climb up to Rs.400-450 million.