The Nepal-India Chamber of Commerce & Industry (NICCI) on Wednesday briefed Finance Minister Rameshwor Khanal about the potential negative impacts of India’s recent Goods and Services Tax (GST) revision on Nepal’s manufacturing industries. The chamber also raised concerns about the suspension of Initial Public Offerings (IPOs) and ongoing issues affecting foreign direct investment (FDI).
During a meeting held at the Finance Ministry in Singha Durbar, a delegation led by NICCI Officiating President Kunal Kayal warned that the GST revisions approved by India’s 56th GST Council—effective from September 22—could significantly disadvantage Nepali manufacturers. The new GST framework, which re-bases maximum retail prices (MRPs) across several Fast-Moving Consumer Goods (FMCG) categories, is expected to widen price disparities, encourage grey-market inflows, and create turnover and profit margin pressures for domestic producers.
According to a memorandum submitted to the minister, Nepali manufacturers may be forced to either match India’s lower MRPs—squeezing profit margins—or maintain current pricing and risk losing market share due to cross-border arbitrage. The chamber cautioned that cheaper Indian products, coupled with exporter liquidity, would likely encourage the illegal inflow of retail-packed goods into Nepal via the open border, thereby undermining local industries.
NICCI stated,
“Nepali industries are already disadvantaged by customs duties and higher production costs. Grey-channel imports bypass these costs, making local manufacturers extremely uncompetitive.”
The chamber identified soaps, toothpaste, shampoos, and food products as the most vulnerable sectors. While consumers may temporarily benefit from lower prices, domestic manufacturers would be unable to reduce their own prices without equivalent tax relief, potentially leading to business closures and job losses.
NICCI also criticized the Securities Board of Nepal (SEBON) for suspending IPO approvals without clear reasoning, saying the move has shaken investor confidence. The delegation further discussed avenues for Indian private sector involvement in Nepal’s post-protest reconstruction efforts and highlighted persistent FDI barriers.
In response, Finance Minister Khanal stated that the current government’s priority is to conduct free and fair elections and focus on reconstruction. He encouraged companies to support the government’s reconstruction fund while acknowledging that several issues raised by NICCI would require new legislation, which a caretaker government cannot enact.
“However, I will try to facilitate the issues,” Khanal assured.
Regarding IPOs, the minister said SEBON would soon address the matter, and he also promised to review the GST-related challenges.
The NICCI delegation included Treasurer Kiran Malla, Executive Members Navneet Gupta and Uttam Bhlon, IBF Co-Chair Saibal Ghosh, Member Vidushi Rana, Director General Keshab Man Singh, Director Marshal Rathour, Program Consultant Kuber Chalise, Unilever Nepal Legal Head Govinda Shahi, and Chief Finance Officer Ayush Sharma. Representatives from Berger Nepal, Unilever Nepal, National Insurance Company Ltd, Goldstar Shoes, hydropower firms, and other companies were also present.
