Terming the proposed hike of Value Added Tax (VAT) and tax on steel in national budget 'excessively high', the country's steel manufacturers on Tuesday said the move will create a serious setback for the sector.
As per the proposal, total VAT and tax will rise by 650 per cent from the existing rates, as a result price of per tonne steel rod will increase by Tk 10,000 to Tk 12,000, they mentioned.
Bangladesh is one of the emerging steel markets and such unusual hike will not only hamper the sector's growth but also affect consumers and the country's infrastructure development, they said. Costs of apartments and buildings will rise, they cautioned.
Keeping this in view, they urged the government to review the proposal in the 2019-20 budget and fix the rates at a reasonable level.
The call came at a press conference at the National Press Club in the city, jointly organised by the Bangladesh Steel Manufacturers Association (BSMA), Bangladesh Re-rolling Mills Association (BRRMA) and Bangladesh Steel Mill Owners Association (BSMOA).
BSMA Chairman Manwar Hossain, Secretary General Md Shahidullah, Vice Chairman Zahirul Hoque Chowdhury, founding chairman Sheikh Masadul Alam Masud, and BRRMA Secretary General Mahbubur Rashid were present at the conference, among others.
The BSMA chairman said steel is one of the vital sectors for an economy like Bangladesh, but the government's proposed VAT and tax will seriously harm the industry.
"Bangladesh's steel industry is in a shock now (following budget proposal)," he said. Total VAT and tax will increase by almost 650 per cent as per the proposal, he pointed out.
"Of the total, only VAT will increase by 546 per cent," he noted.
Prices of rod will go up by Tk 1,100-Tk 2,500 per tonne as VAT on the key construction material has been increased.
Manwar Hossain stated that imposition of the proposed VAT on various phases of steel trade will shoot up prices of the material as the tax will rise by different amounts such as scarp sales from Tk 300 to Tk 1,750, billet sales Tk 450-1,550, rod sales Tk 450-2,000 and retailer's sales Tk 200-3,300.
The accumulated VAT will be Tk 9,050 per tonne from the existing Tk 1,400, he said.
The proposed budget also imposed Advance Income Tax (AIT) at the rate of 3.0 per cent on scrap sales and steel rod sales.
The steel manufacturers suggested the government increasing the existing VAT rates by 61 per cent in total to Tk 2,250 from Tk 1,400 per tonne.
The BSMA chairman said steel manufacturing is a capital intensive industry so the unusually high taxation will also negatively influence the lending agencies like banks.
He also criticised the proposed discontinuation of Income Tax Ordinance 1984, section 52(1) provision(b), as it will hamper the growth of backward and forward linkage industries like steel in the country.
Responding to a question by a reporter, Hossain said he is hopeful that the government would consider the steel manufacturers' demand.
Responding to another query he said the BSMA is strongly monitoring the market so that it doesn't become unstable.
Md Shahidullah urged the government not impose tax on scrap import by the steel manufacturers until it starts extracting iron from the country's first ever mine discovered in Dinajpur.
Masadul Alam mentioned that the proposed gas tariff hike has already been posing a threat to the sector.
The unusual VAT, if comes into effect, will worsen the situation, he added.
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