The government is likely to exempt more products and services from VAT in the upcoming fiscal year (FY), 2017-18, under the new VAT law.
Education and medical services may be fully exempted from payment of VAT (value added tax).
Officials said an extended list of Value Added Tax (VAT)-exempted products and services is under preparation for the next FY to provide relief to both consumers and industries.
The VAT and Supplementary Duty Act 2012 is scheduled to be implemented from July 1, 2017. It is set to offer a wide range of VAT exemptions compared to that of the existing VAT law, framed in 1991.
Basic food items, life-saving drugs, agricultural products and their transportation, medical services, education, and newspaper printing, publication and distribution along with a few other items would get VAT exemption under the new law. Areas of basic food items and life-saving drugs may also be widened in the upcoming FY.
Sources concerned said majority of the products that are currently enjoying VAT exemption under the VAT law 1991 will continue to enjoy the waiver under the new law.
Currently, there are some 535 products in the exemption list under the existing VAT law. Besides, some services are also enjoying VAT exemption.
The number of products and services under VAT exemption may be increased to 1,200 in the new law, the sources also said.
Officials said the new law has the provision of exempting small businesses having annual turnover of up to Tk 3.0 million from payment of VAT.
They said the new law would be more business-friendly compared to the exiting one, as scopes of harassment by the VAT officials would reduce due to introduction of the automated system.
National Board of Revenue (NBR) is now preparing the list of exempted products for the next FY. The list is however yet to be finalised.
A senior official said businesses demanded multiple rates of VAT and different exemptions in the new law. But meeting those demands would only distort the VAT system. So, a uniform rate of VAT would be enforced on all services and products after implementation of the new law.
Meanwhile, Finance Minister A M A Muhith, after a budget meeting in NBR on Wednesday, said, "The VAT rate under the new law cannot be disclosed now. But we will try to give a comfortable rate through amendment."
The finance minister also termed the businessmen's proposals to keep the VAT rate within 3.0 to 5.0 per cent 'rubbish'.
"We will know the new rate in the budget," he added.
Cigarette, mobile phone, oil and gas, and cement, are the sectors that are contributing the major part of VAT to the public exchequer.
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