Cement cos get uniform depreciation rate for imported raw materials

The Value Added Tax (VAT) wing has framed a uniform base of depreciation for imported raw materials of the cement companies to ensure a level-playing field for them and proper collection of VAT.
It has set a common deprecation rate for clinker and slag  at 2.0 per cent and 1.0 per cent respectively following surveys by a high-powered committee.
A committee, comprising VAT officials of the Large Taxpayers Unit (LTU) and representatives of the cement manufacturing companies, has set the benchmark of depreciation claim of raw materials of cement companies.
The committee is now working to set depreciation rates for gypsum, limestone and fly ash.
Commissioner of the LTU VAT Matiur Rahman said the uniform depreciation would ensure a level-playing field for all companies and proper collection of VAT from the sector.
"Different VAT commissionarates across the country allow the cement companies to enjoy various rates of depreciation due to the absence of a uniform policy," he said.
VAT collection from the companies on the basis of production of cement also varies from company to company, he added.
The LTU commissioner said a fair data base for all products and sector was needed to check tax evasion.
"There should be a common transaction value of a product or a sector to avoid disparity in imposition of tax and help the businesses stay competitive," he added.
In a study, it has been found that field-level VAT offices in Khulna, Jessore, Rajshahi, Sylhet, Chittagong and Dhaka allowed cement companies to enjoy different rates of depreciation while imposing VAT calculating total production.
According to the Bangladesh Cement Manufacturers Association, Unique Cement Industries Limited, Meghnaghat, Narayanganj declared average 4.10 per cent depreciation for clinker.
Crown Cement Industries Limited declared 2.251 per cent depreciation for clinker, 1.142 per cent for gypsum, 1.263 per cent for fly ash, 1.083 per cent for limestone and 1.229 per cent for slag.
Metrocem Cement Limited declared depreciation ranging from 3.85 per cent to 4.50 per cent for clinker. The company also declared 5.5 to 10 per cent deprecation for gypsum, 7.0 to 12 per cent for fly ash, 3.0 to 5.0 per cent for Lime stone and 8.0 to 13 per cent for slag.
Some 12 large cement companies pay VAT under the LTU. Of them, nine companies declare 2.0 per cent depreciation for clinker and 1.0 per cent for other raw materials.
The remaining three companies, Akij Cement Company Limited, Seven Circle (Bangladesh) Limited and Unique Cement Industries Limited, declared higher depreciation than that of the companies which were not accepted by the LTU.
Depreciation of raw materials varies from companies to companies and also on the basis of location. Factories located on river banks face higher depreciation of raw materials than that of other industries.
Imported raw materials of cement have moisture that causes depreciation of the ingredients.
Talking to the FE, former President of the Bangladesh Cement Manufactures Association (BCMA) Mostafa Kamal, who is chairman and Managing Director of Meghna Group, said moisture level of imported raw materials varies from country to country.
"At least 8.0 per cent depreciation is caused because of this moisture in raw materials. The process of fixing depreciation is yet to be finalised," he added.
He, however, declined to accept 2.0 per cent depreciation for clinker and one per cent for slag.
He said the cement companies may go to appeal or legal proceeding if such a rate of depreciation is fixed.
A committee comprising technical persons from the Bangladesh University of Engineering and Technology (BUET) is inspecting the factories to assess the average depreciation of raw materials of cement, he added.
Mohammad Amirul Haque, Managing Director of Premiere Cement, said a uniform depreciation base can be welcomed if it is justified.
A minimum depreciation for slag should be 8.0 to 10 per cent, he added.
"The VAT authority should not focus on only tax collection by imposing measures unilaterally," he added.
Cement companies under LTU paid Tk 2.33 billion VAT in 2015-16. The payment of VAT increased to Tk 3.0 billion in the just-concluded fiscal year.
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