Businesses on board with government over VAT

Businesses across Bangladesh have arrived on a mutual consensus with the government's plan to introduce value added tax (VAT) from July. This has cleared the way for the implementation of the much-hyped VAT Law 2012.

Upon implementation, the scheme will get four different rates of VAT applied on most of the goods and services under the existing VAT law 1991 – 5 percent, 7.5 percent, 10 percent and 15 percent. This will improve the overall situation.

Post a meeting with Finance Minister AHM Mustafa Kamal, Shafiul Islam Mohiuddin, the President of the Federation of Bangladesh Chambers of Commerce and Industry, told the reporters, “We have agreed in principle and will fix the remaining issues later.” 

Representatives of the top trade bodies, revenue officials were present among others at the meeting held on the premises of the planning ministry. The key person in attendance was Salman F Rahman, co-founder of Beximco Group. He is  also the prime minister's adviser on private industry and investment. Sources reveal that Rahman has played a crucial role in helping the government and the business bodies reach a consensus.

The National Board of Revenue (NBR), in consultation with businesses will slot the sectors into the four VAT rates over the next two months. If sources are to be believed, businesses have accepted the 5 percent, 7.5 percent and 10 percent slabs of VAT.

The introduction of multiple rates requires amendment of the VAT and Supplementary Duty Act. Introduced back in 2012, the Act proposed a uniform 15 percent slab. The new law, framed at the prescription of the International Monetary Fund in a bid to accelerate revenue collection, was not received well by the businesses.

The VAT law was set to be rolled out under an automated environment from 2015. However, the implementation was deferred on several occasions, with the most recent being in 2017, just days before it was due to take effect on July 1. The government postponed VAT implementation by two years amid pressure from a section of businesses and lobby groups.

According to NBR Chairman Md Mosharraf Hossain Bhuiyan, the 15 percent standard rate would remain in sectors such as cigarette, telecom and gas. The VAT-free turnover limit is expected to be increased to Tk 50 lakh from existing Tk 36 lakh. Also, the ceiling of turnover tax would be increased from Tk 80 lakh to Tk 3 crore. The rate of turnover tax would be also be hiked to 5 percent from 3 percent at present.

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