A scarcity of potatoes and onions has gripped the Kathmandu Valley as traders cease their sale, citing the government's imposition of a value-added tax (VAT) on these essential agricultural products. The Potato Onion Traders Association (POTA) has stopped supplying these items to retailers and issued warnings of fines up to Rs 100,000 for any violations. This abrupt disruption has left vegetable sellers unable to meet consumer demands.
Previously untaxed, potatoes and onions now face a 13 percent VAT, a decision embedded in the Financial Bill 2023 that amended the Value Added Tax Act of 1996, removing 170 goods from the tax-exempt list. Protests from traders and consumer rights activists have ensued, but the government has not rescinded its VAT implementation.
POTA's General Secretary, Prakash Gajurel, explained that protests were triggered by the government's tax authority taking action against non-compliant traders. Consequently, the supply of potatoes and onions has halted for the past three days. The government's rationale for the VAT is rooted in concerns over the escalating import of these items, impacting both locally produced and imported goods.
Nepal, reliant on imports from India and other nations to meet market demands, faces challenges in balancing local production and imports. The Ministry of Agriculture and Livestock Development, unaware of the traders' supply halt, is addressing concerns by urging authorities to differentiate between local and imported products when applying taxes. The current situation underscores a complex interplay of taxation policies, trade dynamics, and the delicate equilibrium between supporting local production and fulfilling market needs through imports, resulting in a tangible shortage of these kitchen staples in the Kathmandu Valley.