Prices won't rise under new VAT law: NBR

The revenue authority yesterday said the prices of goods will not rise in general once the new VAT law comes into effect in July 1.

The National Board of Revenue's assurance comes amid concerns that the prices of many goods and services will soar, while various local industries will face increased competition with imported goods once the new VAT and Supplementary Duty law is implemented.

It said the net VAT burden under the new law will be 13.04 percent because of the scope to get rebate and inclusion of VAT in the selling prices of an item.

The government is also considering measures so that the prices of products that currently enjoy waiver or low VAT, such as edible oil and rod, do not rise, said the VAT Online Project in a press release.

The VOP, which is an office under the NBR, issued the statement to mark a discussion on implementation of the new VAT law at its office at the Institute of Diploma Engineers, Bangladesh.

At present, rod, a key construction material, enjoys a fixed amount of VAT.

The new VAT law, which envisages a uniform 15 percent VAT instead of the existing multiple rates, will be implemented under an automated environment, bringing down the curtains on the present manual system.

At the programme yesterday, NBR Chairman Md Nojibur Rahman said domestic industries will be given protection.

Incentives for export-oriented sectors will also be present so that the locally manufactured goods can enjoy comparative advantage in the international market, he said.

Representatives from businesses and professional bodies said the impact of 15 percent uniform VAT will fall on the country's 16 crore populations: they will all have to pay the consumption tax.

Subsequently, they demanded slashing the uniform VAT rate to 7 percent for smooth transition into the new system.

Earlier, the Centre for Policy Dialogue by analysing rates said Bangladesh's proposed uniform VAT rate of 15 percent is on the high side when compared to neighbouring low- and middle-income countries in South and East Asia.

It recommended trimming the present 15 percent VAT rate to 12 percent gradually.

“People will have to pay the VAT, so it should be seen from the consumers' point of view,” said Md Humayun Kabir, chairman of Taxation and Corporate Laws Committee of the Institute of Chartered Accountants Bangladesh.

“Political sides should be concerned about it too. This is not just the issue of businesses.”

But firms are concerned if their cost of doing business will rise, Kabir added.

In response, Law Minister Anisul Huq said the new law will reduce the cost of doing business and bring in transparency and accountability.

The NBR and the businesses held a series of discussions on the new VAT law and there was also a joint declaration too, said Abdul Matlub Ahmad, president of the Federation of Bangladesh Chambers of Commerce and Industry.

“But we are not yet clear whether the recommendations of the joint declaration will be accepted. We are kept in suspense.”

Ahmad said there are some services such as doctors' consultation where 15 percent VAT will be applicable. “This would be too high.”

Besides, withdrawal of supplementary duty under the new law may affect various domestic industries.

Imported goods will be cheaper, Ahmad said, citing biscuits as a case in point.

“The government should not take any such step,” he added.

NBR officials said the law will be implemented gradually so that businesses can get accustomed with the latest legislation and comply accordingly.