Rod prices to soar on new VAT law

Steelmakers yesterday warned of price hike of rod, a key construction material, because of the imposition of 15 percent VAT under a new law that is going to be effective from July.

The value-added tax under the new law will also bloat the government’s public works budget, they said.

The government is the main user of rod, accounting for 70 percent of their outputs.

At present, the manufacturers pay Tk 825 as VAT for each tonne of rod based on a tariff value system. But once the VAT and Supplementary Duty Act 2012 comes into force the amount will multiply.

Framed at the prescription of the International Monetary Fund, the law, which will replace the present VAT Act 1991, stipulates a universal 15 percent VAT rate.

“The ongoing development activities by the government will seriously be affected if the 15 percent VAT is imposed on rod,” said Abul Kashem Mojumder, secretary general of Bangladesh Auto Re-rolling and Steel Mills Association (BARSMA), at a press conference at Dhaka Reporters’ Unity.

The event was co-organised by BARSMA, Bangladesh Re-rolling Mills Association, Bangladesh Steel Mill Owners Association, and Bangladesh Ship Breakers Association to urge the government to continue with the present tariff value or administered value of rod.

The industry operators said they can provide rod to final users at between Tk 45,000 and Tk 50,000 per tonne by paying VAT at Tk 825.

But once the new law comes into effect, customers will have to pay Tk 57,500 for a tonne of rod, Mojumder said, adding that the amount of VAT would go up in case of a rise in prices of melting scrap and billet, the raw materials of rod, in the international market.

Bangladesh consumes 40 lakh tonnes of steel annually, with the demand rising 7-8 percent a year, according to industry insiders.

The steel millers’ warning comes after the National Board of Revenue in a paper to the high-ups of the government last month said the cost of government’s priority programmes such as Padma bridge and metro rail will escalate once the new law takes effect.

“It will require re-fixation of project costs and increases in budget allocation,” the paper said.

The steel industry operators yesterday urged the government to continue with the tariff value system when it comes to fixing VAT for rods in the forthcoming fiscal year.

“If the government remains stuck to its position and slap a 15 percent VAT, we will have no way but to take to the streets to realise our demand,” said BARSMA Chairman Sheikh Masadul Alam Masud.