Changes in new VAT law likely to pacify businesses

The government may finally revise upward the VAT-exemption ceiling for small businesses and widen scope of Supplementary Duty (SD) protection for local industry in the new law.
According to sources, the move has been made in the face of concern being aired by cross-sections of people, including businesspeople, economists and consumers, about price effect and sustainability of small businesses after enforcement of the new VAT law.
The much-debated fiscal law -- which stipulates a flat rate of the value-added tax at 15 per cent -- is set to take effect from July 01, 2017.
The new piece of legislation would replace the existing VAT law 1991 and have a digitised VAT-collection system.
Sources concerned said the draft VAT and SD Act is going through a reappraisal by government high-ups following persistent pleas of the businesses in particular.
VAT-exempted turnover limit for small businesses might be raised to Tk 5.0 million while turnover limit for enjoying 3.0 per cent turnover tax may be set at Tk 12 million.    
In the draft VAT and SD act, originally framed in 2012, the VAT-exempted annual turnover for small businesses has been set at Tk 3.0 million.
Businesses having annual business turnover up to that limit will not have to pay the tax after implementation of the law.
Currently, there is no VAT-exemption ceiling for the traders in the existing VAT law of 1991. All of them across the board have to pay the tax on their business turnover.
Annual turnover limit for enjoying 3.0 per cent tax is Tk 8.0 million in the draft VAT law.
In an amendment to the draft law, the National Board of Revenue (NBR) is considering inclusion of some 550 items on the list of SD as a protective safeguard for the local industry.
Currently, 1,520 local products are protected as the NBR imposed SD on the products at import stage to give the domestic ones competitive edge over imported ones.  
In the draft law, SD on some 1,350 products may be scrapped. After implementation of the new law, only 170 products will have SD as an add-on to import price.
In the budget proposal for fiscal year 2017-18, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) proposed that the government continue the SD protection for sustainability of the local industry.
Officials said the draft of the new VAT law would be amended in a manner so that local industry may not have to receive any blow.
The NBR has been reviewing the number of items under SD that have been imported in the last five years, officials said.
Those items having local production may enjoy SD protection in the new law, they added.
VAT officials said there is fear factor about 15 per cent VAT rate but it does exist on many items and services in the existing VAT law, too.
However, there will be no multiple rates of VAT in the new law, but an effective refund system will be established under digitized system.
For this purpose, actual VAT rate will be reduced significantly, even down the level in the current law, after the businesses claim their 'input tax credit', the officials said.
"There is no reason to get panicked on the new law as it would simplify VAT system and reduce harassment," said one.
Both businesses and Finance Minister AMA Muhith exchanged heated words at the recent budget-consultative meeting over the VAT law.
In the meeting, NBR chairman Md Nojibur Rahman hinted at some positive changes to be brought in the budget as per expectation of the businesses.
    doulot_akter@yahoo.com