Local industries to get better protection

The government is likely to provide increased protection to domestic industries from imported commodities and give more comfort to small and medium enterprises while implementing the new VAT law from July this year.

Revenue officials said they are working to increase the number of products in the list of supplementary duty (SD) to discourage imports and better safeguard the interests of the domestic industries. They are also working to increase the VAT-exempted threshold and turnover limit for small and medium enterprises.

The National Board of Revenue plans to expand the list of VAT-exempted items to ease the burden on consumers who have to pay the consumption tax to buy essential goods and services.

“The list will be published soon,” said NBR Chairman Md Nojibur Rahman in a Facebook post on May 7.

The new law waives VAT on basic foods and unprocessed agricultural products, education, healthcare and life saving drugs, transport and residence.

The move comes amid concerns among businesses and many consumers that implementation of the VAT and Supplementary Duty Act 2012 will increase the cost of living.

The new law envisages a flat 15 percent VAT rate, ending the reduced rates that are now applicable for many goods and services, such as cooking oil, rods and electricity.

Framed at the prescription of the International Monetary Fund, the new law will replace the existing VAT Act 1991, doing away with the practice of package VAT paid by small and medium shops, including the ones that should pay VAT based on actual sales, according to officials.

The new law seeks to give VAT exemption to shops and business that register up to Tk 30 lakh in annual turnover. It envisages imposition of 3 percent tax on firms with annual turnover from Tk 30 lakh to Tk 80 lakh.

Businesses and the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) have been urging the government to raise the VAT exemption limit to Tk 36 lakh a year instead of Tk 30 lakh. 

They also want a hike in the turnover threshold for turnover tax under the new law.

In his Facebook post, Rahman said active consideration will be given to increase the turnover ceiling in both the cases. However, he did not elaborate. A senior revenue official said the government may be more generous – the VAT exemption limit for small and medium shops as well as turnover threshold to impose minimum taxes may be higher than what businesses are demanding now.

“We are working to place a proposal with high-ups for decisions in this regard,” said the official, preferring anonymity.

The number of products that will face supplementary duties in imports is also likely to rise from 170 items to nearly 500 in order to please entrepreneurs and protect domestic industries from stiff completion from imported products.