The National Board of Revenue (NBR) will collect Value Added Tax (VAT) at a rate of 15 per cent on port services for operating international flights, officials said.
Although in the budget proposal, Finance Minister AMA Muhith offered VAT exemption on the service charges, later he re-enforced the tax on June 28, they said.
NBR officials said the VAT authority withdrew the exemption after it found many of the countries are collecting VAT from these sources.
They said VAT on the charges and fees of various types of services such as aeronautical and non-aeronautical services are one of the major sources of revenue.
The NBR had offered the exemption in the proposed budget, on June 7, last, on the basis of information, provided by Canada-based International Air Transport Association (IATA).
NBR officials said a letter of IATA regional vice-president for Asia-pacific Conrad Clifford, dated May 16, was considered for offering the exemption.
The IATA official made the plea to the Prime Ministers' Office (PMO). Later, the PMO forwarded it to the NBR for taking necessary action.
In the letter, he wrote that levying of VAT on various aeronautical charges was a matter of serious concern to the aviation sector.
'Imposing VAT in this manner is not only counter to international standards, policies and agreements but unnecessarily increases the cost of travel to passengers and the cost of exports to businesses,' the IATA official wrote.
Bangladesh is a signatory to such policies and agreements.
However, NBR has found various countries are charging VAT on the service charges. Officials said it is also not contradictory to the international standards and policies.
The decision of withdrawal became effective from June 07.
NBR first imposed VAT on both aeronautical and non-aeronautical charges in the fiscal year 2009-2010. There was a legal dispute between the international airlines and NBR regarding VAT on aeronautical charges. Later, the High Court (HC) issued verdict in favour of NBR.
The Civil Aviation Authority of Bangladesh (CAAB) imposes several charges and fees to the airlines against the services like landing, parking, route navigation, security and boarding bridge costs.
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