A new fiscal measure to bring retail businesses under the tax net by introducing a nominal turnover tax is set to come in the upcoming FY27 budget.
The model, the first of its kind, would help the government mop up revenue from the informal economy.
Under the measure, dealers or manufacturers would deduct a 0.2 per cent tax on the supply of goods to retail shops.
Income tax officials will connect the tax payment through A-challan on the mobile app.
A senior tax official says retailers will get a text message (SMS) on their mobile phones every three months about the amount of taxes they have paid so far.
With this, retailers would be able to know whether they have taxable income or not, he says.
The tax model has proved successful in India to expand the tax net, he adds.
The official is optimistic about getting retailers' cooperation as the tax rate is nominal, Tk 2 for each Tk 1,000.
Business association data shows there are nearly 30 million retail businesses across the country. The tax would have to be deducted at source by dealers and manufacturing companies at the time of payment to retailers.
Corporate taxpayers will show the tax to adjust with the payable taxes in their annual tax returns.
Currently, the government does not receive any taxes from retail shops.
Tax expert SnehasishBarua says introducing upstream tax collection - where distributors/companies collect tax on goods sold to retailers - could significantly broaden the national income tax net.
By establishing a documented purchase baseline, this model captures the hidden income of informal retailers, he says.
"It levels the competitive playing field for corporate superstores already burdened by strict compliance, while equipping the VAT authorities with transparent data to bring retailers under the VAT net and boosting overall revenue collection.
"However, policymakers must carefully manage a critical economic challenge. Shifting this tax burden upstream to manufacturers risks driving up operational costs, potentially inflating the final retail prices of everyday products for consumers," he adds.
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