10-year tax exemption likely for new home appliance makers

The government is likely to offer a 10-year tax exemption to investments in manufacturing of home appliance to diversify the country's manufacturing base and cut import dependence, said finance ministry officials yesterday.

Manufacturing plants launching commercial production of washing machines, electric sewing machines and kitchen appliances such as blenders, microwave ovens and induction cookers from July of fiscal 2021-22 are likely to enjoy the exemption.

The incentive may remain effective until June 30, 2030, said officials.

The National Board of Revenue (NBR) may impose a condition requiring manufacturers to ensure value addition between 20 per cent and 40 per cent.

The disclosure may come in tax measures scheduled to be placed by Finance Minister AHM Mustafa Kamal on June 3.

Household appliances caught the attention of policymakers at a time when demand has been growing thanks to rising incomes and craving for convenience.

Today the annual market for home appliance is roughly over Tk 10,000 crore, three-fourth of which is comprised of refrigerators, televisions and air conditioners, said industry insiders.

Officials said washing machine and microwave oven sales jumped after the outbreak of coronavirus in the country in March last year.

Many families resorted to the mechanical means to regularly wash and clean clothes as a part of their efforts to fight the highly contagious virus.

Demand for other kitchen appliances has also grown with more than a dozen electronics retailers offering products to attract customers.

A number of them have already set up facilities to make refrigerators and ACs while a couple are setting up facilities to make washing machines.

Currently, the NBR offers progressively declining tax breaks to home appliance-making industries for five to 10 years depending on the location of the factories.

Factories in Dhaka and Chattogram divisions are entitled to tax breaks at a declining rate for five years if they begin commercial production between July 1, 2019 and June 30, 2024.

Firms in other divisions will get 10-year benefit while the rate of exemption declines gradually to be phased out on the 11th year.

A ministry official said firms already making home appliances would not get the tax incentive.

"Only new factories are likely to get the tax break," he said.