Multinational companies (MNCs) have asked the government to maintain difference in the custom and excise duty imposed on raw materials and imported finished products.
Suggesting the government to reconsider such practical issues in the upcoming budget for the nest fiscal year 2025-26, they have also asked to treat payment of royalty against usage of trademarks as expenses. “We ask the government to reconsider the custom and excise duty imposed on raw materials in comparison to the imported finished goods,” said Managing Director and Chief Executive Officer of Unilever Nepal, Amalān Mukherjee, during a discussion with president of Nepal–India Chamber of Commerce and Industry (NICCI) Sunil KC.
During the meeting, they also discussed various problems faced by multinational companies operating industries in Nepal. Mukherjee also sought NICCI's support on several issues and proposed recommendations to enhance Nepal’s economic activity while increasing revenue collection from locally manufactured goods.
As Unilever Nepal Limited (UNL) has been in operations in Nepal for the past 31 years and has been adding vitality to the domestic community in the areas of hygiene and beauty.
Local manufacturing has been a key priority for UNL since its inception, and in the past 18 months, the company has added more than 35 new products to the locally manufactured segment. As the leading Fast Moving Consumer Goods (FMCG) company in Nepal and representing the MNCs in the industries with direct manufacturing capacities the Unilever has proposed the government to reconsider the custom and excise duty imposed on raw materials in comparison to the imported finished goods. “We have noticed that the duties imposed upon certain categories of raw materials remain on par or higher when compared with the finished goods imported.
Section 25(d) of Industrial Enterprises Act 2020 states that custom duty on raw materials, subsidiary raw materials, and packaging materials as required for production by an industry is generally less by one level than customs duty on imports of finished goods produced from such raw materials,” Mukherjee said, adding that this inverted duty structure remains a major challenge in accelerating the process.
Likewise, he also said that the payment of royalty against usage of trademarks should be treated as expenses. “Multinational Companies bring technology, expertise and brands into the country of operations,” Mukherjee said, adding that multinational pay royalty against the usage of trademark, brand and intellectual property they use of their parent companies.
"Tax officials disallowing royalty payments as expenses in recent years has discouraged MNCs from diversifying, hurting both corporate and government revenue," he said, urging the government to address this issue in the budget.
Similarly, distributors and businesses are getting affected by inconsistent collateral provision by banks to procure bank guarantee, according to him. “Access to credit has become increasingly important due to the rising cost of doing business and fluctuating demands in Nepal.”
According to Mukherjee, this situation directly impacts business performance and the overall GDP growth. “As a recourse, most businesses are now able to freeze and pledge their assets to gain a workable bank guarantee.”
He also asked the government to review the definition of ‘Trading’ and permit importing finished goods to Nepal. “At present UNL operates with 164 products and has the potential to localize further, provided the acceptance of Nepali consumers,” Mukherjee said, adding that peer countries in which Unilever currently operates at present continue to serve more than 300 products to consumers.
“UNL, committed for manufacturing, has invested approximately Rs 30 million in last two years to boost local manufacturing and seeks import opportunity.”
Mukherjee also asked the government to extend excise duty credits to packaging materials. “This would bring down the cost of doing business significantly,” he added.
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