Nepal Struggles to Compete as India Lowers GST on Consumer Goods

Stakeholders have warned that Nepali products are losing their competitive edge in the domestic market after the Government of Nepal failed to adjust customs duties and taxes in line with India’s sharp reduction in the Goods and Services Tax (GST) on daily consumer items.

India simplified its GST structure in September and slashed tax rates on a wide range of goods in a bid to make its products more competitive in domestic and international markets after the United States imposed a 50 percent tariff on Indian goods, prompting New Delhi to adopt countermeasures to protect its export sector.

Despite running a large trade deficit with India, Nepal has not revised its tax policies in line with India’s recent changes, making it increasingly difficult for Nepali products to compete with cheaper Indian imports, the Nepal–India Chamber of Commerce & Industry (NICCI) said.

In a statement issued on Sunday, the chamber said Nepali industries are becoming uncompetitive in terms of pricing as the government has failed to adjust customs duties and tax rates on raw materials and manufactured goods, introduce relief measures to reduce production costs, and implement timely industry-friendly policies.

NICCI warned that the growing price gap between Nepali and Indian goods has led to a rapid rise in illegal trade, seriously affecting domestic industries, legitimate businesses, and the formal trading system. The chamber said uncontrolled inflow of goods through informal channels has had a negative impact on the domestic market.

NICCI submitted a memorandum to Home Minister Om Prakash Aryal on Sunday, urging the government to control illegal and unauthorized imports and trade through the Nepal–India open border. The chamber called for enhanced surveillance at all 22 border checkpoints, stricter monitoring of imports of sensitive goods following India’s GST adjustments, stronger coordination among security agencies, the customs department, and border management bodies, and the establishment of a dedicated mechanism to curb illegal trade and under-invoicing.

Home Minister Aryal, according to NICCI, assured that the government would take immediate and appropriate measures to control illegal trade based on the chamber’s recommendations.