Steel makers seek tax breaks

Steel makers in Bangladesh are seeking reduced import duty, value added tax (VAT) and other tariffs in the upcoming national budget to provide products at lower prices, meaning that construction costs would likely decrease.

In a letter to Finance Minister AHM Mustafa Kamal earlier this month, the Bangladesh Steel Manufacturers Association (BSMA) proposed slashing VAT on sales to 1 per cent from 2 per cent.

In addition, VAT should be cut to Tk 450 from Tk 1,200 per tonne for locally sourced and imported scrap and billet, and Tk 900 from Tk 2,200 per tonne for purchases of mild steel (MS) products.

Similarly, customs duty should be reduced to Tk 500 from Tk 1,500 per tonne and advance income tax to Tk 100 from Tk 500 per tonne, it said.

The BSMA made these demands considering the current market situation, which remains unstable due to the global economic downturn brought on by various crises.

Manwar Hossain, president of the BSMA, said the domestic steel industry has faced several setbacks ever since the onset of Covid-19 in 2020.

For example, raw material imports have become severely constricted as steel makers are struggling to open letters of credit amid the ongoing US dollar shortage.

And as around 90 per cent of the raw materials used for producing steel comes from abroad, this has led to higher production costs and a subsequent working capital deficit in the industry.

However, inflationary pressure resulting from the Russia-Ukraine war could now deal a fatal blow as power and gas prices have surged abnormally in recent times.

Hossain then informed that around 15 per cent of the production cost for making steel goes towards energy and so, the price of steel products is skyrocketing.

According to market data of the Trading Corporation of Bangladesh, MS rod has been retailing at Tk 101,500 per tonne since May 15.

Also, the steel industry is suffering badly as infrastructure development in the country and construction activities in the private sector have slowed significantly amid the US dollar crisis.

This has directly impacted the overall construction industry as hundreds of businesses related to housing, cement, ceramics, hardware and more have been affected.

As such, the roughly 50 lakh people employed by these institutions, including steel makers, are now at risk of losing their jobs, the BSMA said.