The government is likely to backtrack on its move to implement the new VAT and Supplementary Duty (SD) Act in the upcoming fiscal year following agitation of businesses and less preparedness of both taxmen and taxpayers.
The National Board of Revenue (NBR) is set to continue the existing VAT law framed in 1991 for the FY 2016-17 by amending and updating a few provisions of the law.
Sources said the decision to stay the existing VAT law has been taken in line with instruction of Prime Minister Sheikh Hasina.
Finance Minister AMA Muhith is likely to announce the decision on continuation of the existing VAT law in parliament in his budget speech on June 2.
However, the government is likely to incorporate some of the provisions of the new VAT and SD Act, 2012 in the existing law to upgrade it and remove its faulty clauses, official sources said.
They said the new law may create stiff competitive market for local industries as protection in the form of Supplementary Duty (SD) will be withdrawn from domestic industries.
Many of the local businesses are yet to develop automated accounting system to claim input credit which is the main benefit of the new VAT law, they added.
Cost of doing business will increase substantially for the businesses as they cannot claim tax credit, they said.
Earlier, Dr Ahsan H Mansur, Executive Director of the Policy Research Institute (PRI), at a pre-budget meeting at NBR said full application of a new VAT and SD law from July will have disruptive implications for the country's manufacturing sector with strong resistance from the import-substitution sectors.
The SD will be withdrawn from 1,400 products in one shot while only 170 products will enjoy protection under the new law.
Dr Mansur suggested the government to withdraw protection in phases to help the local industries cope with the changes.
The government has framed the new VAT and SD law in line with suggestions of the International Monetary Fund (IMF).
As per conditions of the Extended Credit Facility (ECF), the government agreed to enforce the new VAT law from FY2017.
The government is facing agitation from businesses regarding implementation of the new VAT law as it will introduce a uniform rate of VAT at 15 per cent for all businesses, expect small ones.
The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) urged the Prime Minister to intervene on the issue as the new VAT law bypassed the recommendations of a joint committee.
The joint committee, comprising officials of the National Board of Revenue (NBR) and the FBCCI, made recommendations on January 8, 2015 after examining VAT system across the world. It has placed seven-point recommendation which still awaits implementation.
The committee's recommendations include raising of VAT-free turnover ceiling to Tk 3.6 million, fixing of VAT rate at 3.0 per cent for turnover up to Tk 15 million, setting of VAT at 4.0 per cent for traders who are unable to obtain rebate and at 2.0 per cent for those who sell products at fixed rates.
"It is important to implement the recommendations of the joint committee in national interest," the FBCCI said in a letter to the Prime Minister.
VAT officials said implementation of the new VAT law will require a rule which is yet to be published.
Many of the VAT officials said the field level VAT offices are yet to be prepared to enforce the new law as it has many of the technical applications which will need expertise.
They suggested implementation of the law in phases to avoid any adverse effect on revenue collection.
© 2024 - All Rights with The Financial Express
