New VAT law won’t be effective for next 2yrs
The parliament today passed proposed tax measures for the fiscal 2017-18, deferring full implementation of the new VAT law, which envisages a uniform 15 percent VAT, from July this year.
The much-talked about VAT and Supplementary Duty Act 2012 will be put into effect in phases through amendment of the existing VAT law framed in 1991, said Finance Minister AMA Muhith in his closing speech on budget for the next fiscal at the parliament.
He said implementation the new law, which was tabled in the parliament on June 1 for nod to put into effect from next fiscal, has been postponed based on suggestions from Prime Minister Sheikh Hasina and lawmakers.
The backtrack means that multiple rates of the VAT applicable under the VAT Act 1991, are going to continue until fiscal 1919-20.
This was the third time the government deferred enforcement of the law, which seeks to impose flat 15 percent VAT instead of multiple rates on goods and services.
The proposed application of single rate created worries among consumers and businesses that flat 15 percent VAT would fuel cost of living.
The government, at the prescription of International Monetary Fund (IMF) in 2012 and to fulfill the conditions of $1 billion loans, framed the new VAT law but it re-fixed the deadline for enforcing the legislation twice. The last deadline was July 2017.
Finance ministry officials said initially policymakers had planned to reduce the flat rate of VAT to 12 percent during the passage of the budget in case there was opposition against the proposed 15 percent.
But in the face of opposition from businesses, lobby groups and fear of rise in living cost, policymakers preferred deferring the new VAT law and continuing with the existing VAT Act 1991 by bringing some changes to it.
Officials said VAT measures such as turnover exempted limit of Tk 36 lakh and an upper ceiling for VAT registration at Tk 1.5 crore proposed under the new law are not going to continue.