Services sector demands VAT cuts

A number of services sector associations, including restaurants, have demanded a reduction in value-added tax (VAT) in the next national budget to cope with the adverse effects of the ongoing Covid-19 pandemic.

The businesses raised this demand at a pre-budget discussion with the National Board of Revenue (NBR), held at the NBR conference room yesterday.

Meanwhile, a number of manufacturing units demanded protection for local producers from imported goods.

Imran Hassan, secretary general of the Bangladesh Restaurant Owners' Association, urged the revenue board to set VAT rates at 3, 6 or 10 per cent based on sales amount instead of the current 7.5 per cent and 15 per cent rates for non-air-conditioned and air-conditioned restaurants.

Hassan suggested that the VAT rate be set at 3 per cent for air-conditioned and non-air-conditioned restaurants that register annual sales of Tk 3 crore and 6 per cent for those with Tk 6 crore.

For other restaurants with annual sales above Tk 6 crore, the VAT rate should be fixed at 10 per cent, he added.

The association urged the NBR to make VAT registration numbers mandatory for all types of restaurants so that the sector could be brought under the tax net.

It also demanded the cancellation of a mandatory provision regarding the installation of electronic fiscal devices (EFDs) at restaurants with annual sales below Tk 3 crore.

Meanwhile, the Bangladesh Paper Mills Association asked the revenue board to discontinue its duty-free benefits on paper product imports under the bonded warehouse licence as domestic industries have the capacity to meet local demand.

Representatives of the association said that the country's garment and accessory industries had cumulative demand of 1 to 2 per cent of the total local production while a large portion of duty-free products were sold at domestic markets.

They also demanded a reduction of the duty on imports of certain raw materials and chemicals used to produce thermal paper as the current duty structure is equal for both raw materials and finished products.

Tourism related associations sought duty-free benefits on imports of modern vehicles.

They also sought a reduction of the VAT imposed on accommodation and food services to encourage travelling.

The Bangladesh Supermarket Owners Association demanded the withdrawal of 5 per cent VAT on the sector and sought equal treatment like other shops.

Abu Naser, president of the Bangladesh Outsourcing and Logistics Service Providers Association, said that the country's overall service sector was highly affected by the coronavirus outbreak.

He demanded imposition of income tax on profit, scrapping the provision of imposing income tax at the rate of 0.50 per cent on annual turnover of over Tk 3 crore irrespective of profit or loss.

The Bangladesh Dressmakers Association proposed to set the VAT rate at 4.5 per cent on 30 per cent value-addition instead of the existing 10 per cent.

Bangladesh Courier Service Association also sought a reduction of VAT to 4.5 per cent from the current 15 per cent.

Responding to these demands, NBR Chairman Abu Hena Md Rahmatul Muneem said the revenue board had been working to promote local industries and the benefits should be felt by infant industries.

Tax benefits should not go on for an indefinite period and must be withdrawn for matured industries, he said.

The tax authority also wants to be sure that the benefits are not misused.

Referring to the duty benefit on ambulance imports, he said that there were allegations that unscrupulous people imported ambulances under duty benefit to convert those into microbuses.

Customs offices see almost no import of microbuses, Muneem added.