The government is set to raise the supplementary duty on motorcycle components to 45 percent from 30 percent, and slap a condition that the parts be imported in unpainted form in fiscal 2015-16, much to the disappointment of assemblers.
“We are facing a very serious situation here -- we might have to give up on the assembling business altogether. But, I cannot discharge my employees,” Yoichi Mizutani, managing director of Bangladesh Honda Private Ltd, said at a press conference yesterday.
The event was organised by the Bangladesh Motorcycle Assemblers and Manufacturers Association (BMAMA) at the capital's Sonargaon Hotel.
President of the association Matiur Rahman said the move to consider only unpainted motorcycle components as completely knocked down (CKD) units will be more detrimental to the assembling industry than the duty hike.
The assemblers import motorcycle components in painted form, so the latest move by the National Board of Revenue means they will now have to establish paint shops, which will require Tk 30 crore to Tk 35 crore in fresh investments.
Mizutani of Bangladesh Honda Private Ltd said the requirement to import unpainted components of motorcycle is “unreasonable”, as painting requires high levels of skills and technology. Revenue officials said the dual measures were imposed to encourage local manufacturing of motorcycle components.
But BMAMA said the measures would dissuade local assembling and encourage a switch to import of completely built units (CBU). The increase in supplementary duty takes the total tax incidence for importing bikes in CKD form to 130 percent, which is the same as in CBU form, said the official of Bangladesh Honda, a joint venture between Japan's Honda Motor and state-run Bangladesh Steel and Engineering Corporation.
Mizutani said the price of motorcycles will also rise by Tk 15,000-Tk 25,000 at the customer level, leading to a fall in sales.
In fiscal 2014-15, 1.75 lakh units of motorcycles were sold, down almost 5 percent year-on-year, according to the association, which now fears that the market will squeeze to one lakh units if the proposed duty hike is implemented.
Mizutani said the high prices keep Bangladesh's bike market small compared to neighbouring countries such as India, Pakistan, Vietnam and Cambodia.
The association also urged the government to frame a roadmap to facilitate investment and growth of the sector.