The National Board of Revenue has exempted value-added tax and supplementary duty on import of raw materials and components to make cars as the government looks to encourage development of an automobile industry in Bangladesh.
Car assemblers would be able to import up to 1,600cc cars in completely knocked down forms and the requisite raw materials and spare parts to put them back together without any VAT and SD.
The benefit would prevail for two years beginning from July 1, according to a notification from the tax administration released on June 13 as part of its overall tax and duty measures for fiscal 2019-20.
Between 2013 and 2017, car registration increased, according to Bangladesh Road Transport Authority. On an average, 16,112 cars were registered in a year between 2011 and 2018.
At present, state-run Pragati Industries, Rangs Motors and PHP Family assemble sports utility vehicles and cars of certain engine capacity for the domestic market.
To avail the exemption benefit, assemblers will have to pay advance tax and must have facilities to make more than one component such as reinforcement pipe and brake, fuel tank cover, battery seal and engine hook.
Assemblers will have to establish paint shops approved by the original car manufacturer and use battery and tyres that were manufactured locally and got the seal of approval from the brand.
There should be a technical assistance agreement between the car manufacturers and assemblers to develop skilled workforce and technology transfer, the NBR said.
The cars must be environment friendly and manufactured under the Euro 3 emission standard, it added. The exemption has been offered to lure in investors, particularly from abroad, to the automobile industry, said Md Tariq Hassan, second secretary of VAT policy of the NBR.
Sufi Mohamed Mizanur Rahman, chairman of PHP Family that assembles Malaysian Proton cars, said advance tax should not be imposed. “Why do they impose the tax if they say it will be VAT free?” he said without giving any further details. Md Touhiduzzaman, managing director of Pragati Industries, said the state-run company would be unable to avail the opportunity now as it does not assemble cars of 1,600cc.
It only assembles SUVs between 2,001cc and 3,000cc. Pragati though is building a modern assembling plant that would be complete in 2021 and hence sought the exemption benefit to be extended for five years instead of two. Touhiduzzaman also demanded extension of the exemption facility for assembling of vehicles from 2,001-3,000 cc.