Advance income tax cut for import of cement raw materials

The tax administrator has made the advance income tax (AIT) on the imports of cement raw materials non-adjustable and cut it by two percentage points to 3 percent for the sake of the local manufacturers.

Until last fiscal year, cement manufacturers paid 5 percent AIT for raw material imports and the amount was adjustable based on the final tally of their income. 

They pay the AIT—which is calculated on the income but paid in advance instead of at the end of the year—during the import of raw materials.

In a circular issued on December 19, the National Board of Revenue (NBR) made AIT and source tax non-adjustable from the current fiscal year considering them as the minimum tax.

Manufacturers say the cement sector has fallen into a deep trouble for the “non-adjustable” clause related to 5 percent AIT and 3 percent source tax. 

The source tax is paid during local sales of a product.

Md Alamgir Kabir, president of the Bangladesh Cement Manufacturers Association (BCMA), welcomed the tax cut, saying the government has finally been able to realise the problem of the sector to some extent.

However, he demanded complete withdrawal of the clause, saying 3 percent non-adjustable AIT is not realistic for the sector. 

“The imposition of non-adjustable minimum AIT before finalisation of profit and losses in a business goes against the tax laws in the world as well as in Bangladesh.”

The entrepreneur alleged that the factories based inside the economic zones would get an edge in the local market for being exempted from paying the AIT and the source tax.

Kabir demanded the government consider the issue to create a level-playing field for all factories.

Cement-makers imported raw materials such as clinker, fly ash, iron slag, lime stone, and gypsum worth $1.35 billion last year. 

Of the imports, clinker accounted for $900 million, Ikram Ahmed Khan, managing director of Shun Shing Group, Hong Kong, told The Daily Star recently. 

According to the BCMA, the industry sold 26.2 million tonnes of cement from January to October in 2019, up 15.69 percent year-on-year.

Overproduction has created an unhealthy competition in the sector, which is another troubling issue for the manufacturers, according to Kabir, also the vice-chairman of Crown Cement.

There are 37 active cement factories in Bangladesh who have so far invested over Tk 30,000 crore, he said.

The factories’ combined production capacity is 58 million tonnes a year against a demand of 33 million tonnes.

The sector’s annual sales are worth around $3 billion, or Tk 25,500 crore. Of the consumption, individuals use 25 percent, realtors and developers 30 percent, and the public sector 45 percent, BCMA data showed.