Backward-linkage industries making packaging goods for large manufacturers like multinationals and corporates are struggling for survival following 'discriminatory' tax measures on sales turnover, and they urge budgetary relief.
The industries, known as 'business to business (B2B)', usually produces primary packaging items for goods from large enterprises like Unilever, Reckitt Benckiser, Berger, City Group, Marico Bangladesh, Meghna Group, TK Group, and Bangladesh Edible Oil Limited, industry-insiders said.
Supply of packing materials to the large industries is subject to paying 7.0-percent tax at source as per the Income Tax Ordinance 1984. The tax deducted at source is considered 'minimum tax' as non-refundable or adjustable under section 82C of the ordinance.
Following the imposition of the TDS and other taxes , large industries "have found it expensive to buy the packaging materials from the B2B industries", industry people said, and they look for ways to skirt the burden.
"Existence of the backward-linkage industries is at stake as a number of large industries have preferred to produce the materials on their own," one of the owners of the SME-sector industries says.
Already, own packaging plants for Roopchanda edible oil of BEOL, Berger paints, Meghna, and TK groups have been established to avoid payment of 7.0-percent additional taxes, the industry-insiders said.
The B2B sources fear the large industries would eat up all of the SMEs if such trend continues and immediate remedial steps are not taken to waive the TDS.
"We import raw materials paying 5.0-percent Advance Income Tax (AIT), again advance tax at a rate of 7.0 per cent is imposed on us at the time of supply of finished products," says Syed Nasir, Managing Director of a B2B industry, Xclusive can Limited.
Mr Nasir termed it 'double taxation' on the Small and Medium Enterprise (SME).
If the SMEs pay 30-percent corporate tax, 5.0-percent AIT at import stage, 7.0 per cent at supply stage, and then it has to gain a net profit of around 42 per cent it is impossible on the competitive market.
"We have no objection to paying corporate tax and AIT, but TDS at a rate of 7.0 per cent should be waived for the sake of survival of the industry," he says in his urge for a fiscal measure.
Terming such taxes 'illogical', Ali Ahmed, Chairman and Managing Director, ASTECH Limited, said the imposition of 7.0-percent TDS on turnover of SME plastic packaging manufacturers is equivalent to over 85 per cent of net profits earned by them.
"Source tax for large manufacturers like readymade garments is 1.0 per cent while it is 7.0 per cent for SMEs," he added.
"This irrational taxation on plastic packaging-manufacturing sector is crippling the nascent industry which is employing over 50,000 workers and producing 90-percent import- substitution products," he said.
Shafiqul Islam, the owner of PM Metal Coil Stand, says his company is struggling to survive as it is becoming difficult to continue the business paying high TDS.
"My company is a tax-compliant one and submitting VAT returns every month so far, but it is on way to be extinct and may not be able to submit the return after few months," he adds.
Meanwhile, many of the B2B companies have submitted separate letters to the NBR chairman and tax- policy wing to consider revision of the fiscal measures in the upcoming budget for Fiscal Year 2023-24.
Recently, Bangladesh Plastic Goods Manufacturers and Exporters Association (BPGMEA) also wrote to the NBR to withdraw the 7.0-percent TDS on the B2B in the budget for the upcoming fiscal year.
On different occasions, Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) president Md Jashim Uddin also demanded withdrawal of the 7.0-percent TDS on backward-linkage packaging SMEs.
The government had exempted the backward -linkage industry from payment of 5.0-percent TDS for two consecutive years since July 1, 2017 till June 30, 2019.
In a recent pre-budget meeting, National Board of Revenue (NBR) chairman Abu Hena Md Rahmatul Muneem also underscored the need for conserving some sectors for SMEs from the large industries' monopoly.
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