Bike assemblers face bumpy ride for duty hike
A spike in supplementary duty on completely knocked down units of motorcycles is set to hit the local assembly firms which have signed up for manufacturing the two-wheeler progressively by setting up factories, said assemblers.
The National Board of Revenue has sought to increase the SD to 45 percent from existing 20 percent for the next two fiscal years.
The development comes just one year after the revenue administration offered 20 percent duty rebate on import of motorcycles in CKD format for firms which want to sign up as progressive manufacturers.
As progressive manufacturers, the firms would have two years to build the infrastructure such that from third year onwards they can manufacture some of the components locally.
In response, Bangladesh Honda Private Ltd, Speedoz, Uttara Motor Corporation, Menoka Motors, TVS Auto Bangladesh, Aftab Automobiles, Rancon Motorbikes and Niloy Motors applied to the industries ministry for the privilege and started establishing facilities to manufacture the two-wheelers.
“This is a big blow for us,” said Matiur Rahman, president of Bangladesh Motorcycle Assemblers and Manufacturers Association.
“We are frustrated to see the withdrawal of duty benefit to import CKD bikes several months after it was given.”
He said most of the firms have already bought land after the NBR offered the duty rebate to facilitate progressive manufacturing.
“The construction of our factory is 80 percent complete and work is on way to set up the machinery,” said Rahman, chairman and managing director of Uttara Group of Companies, which is the local assembler and sole distributor of Bajaj Auto.
Following the privilege, imports of motorcycles have increased and assemblers have slashed the prices. “The market expanded after the price cut,” he said.
It is not clear why the revenue administration has made the sudden change in policy, said Biplob Kumar Roy, chief executive of TVS Auto Bangladesh.
“We have been demanding a long-term policy from the government to facilitate the development of the motorcycle industry here. But changes in policies within a short time erode investor confidence.”
The government's support is needed so that investors feel confident to invest in Bangladesh, Roy said, adding that TVS has also begun the preparations for manufacturing bikes gradually.
Last week, Japanese Ambassador Masato Watanabe at a meeting with Industries Minister Amir Hossain Amu raised the issue of SD hike on CKD bikes, according to a press release from the ministry.
He also met with Finance Minister AMA Muhith to talk on the issue, said officials.
Contacted, a senior official of the NBR said the scope of progressive manufacturing of motorcycles was extended based on some conditions.
“But assemblers later informed us that the conditions are too stringent to comply with. This time we have simplified the rules to make it easier for them -- they do not have objections.”
The assemblers' demand for continuation of reduced SD benefit to import CKD bikes for one more year has been opposed by local manufacturers.
The NBR official said any change on the subject will be known on June 28 when the finance bill gets approved in parliament. The budget for fiscal 2017-18 will be passed on June 29.
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