Increase in VAT lifted or cut on various items

Government's finance authority has reconsidered the latest hikes in value-added tax (VAT) and supplementary duty (SD) on eight out of 100 types of products and services following widespread criticism.
The National Board of Revenue (NBR) had increased VAT and SD on 100 items, but now made the revision in view of "adverse impact" on those key sectors, officials said.
Of the eight items, medicine, mobile talk time, Internet services, restaurants, non-AC hotel, motor garage and workshop, sweetmeat shop, brand and non-brand readymade garments will enjoy the previous rates.
The move came within two weeks of the issuance of an ordinance on VAT increases that sparked widespread criticism over such abrupt midyear hike in the spare-none taxes amid mounting inflationary pressure.
Officials of VAT department of the revenue board said they would have to cut the projected revenue mobilisation by around Tk 16 billion in the next six months from the VAT hikes.
Initially, the NBR estimated an additional Tk 120 billion through VAT increases on 100 items by issuing an ordinance in the interim period of governance.
The NBR had to hike VAT to meet conditions set by the International Monetary Fund (IMF) on raising the country's tax-GDP ratio in its budget-support credit package for Bangladesh.
The revenue board now reverted to tax on mobile talk-time at 20 per cent from 23 per cent.
The newly imposed 10-percent supplementary duty on ISP has been scrapped.
The VAT on restaurants would remain 5.0 per cent again from the hiked 15 per cent. Trade VAT on medicine retains at 2.4 per cent, down from 3.0 per cent.
Non-AC hotels would also continue to enjoy 10-percent VAT as earlier. Motor garage and workshop's VAT has also been reinstated at 10 per cent.
Sweet-meat VAT has been cut to 10 per cent. Non-brand and brand dresses' consumers would also pay at previous rates of 7.5 and 10 per cent respectively.
Meanwhile, Finance Adviser Dr Salehuddin clarifies that the value-added tax has not been increased on anyone's prescription or to provide dearness allowance to public employees rather to enhance revenue earnings.
Bangladesh is the lowest tax-paying country, even the lowest among the least- developed countries. Bangladesh's tax-to-GDP ratio is lower than in Bhutan, Nepal, Ivory Coast and Burkina Faso, he says to dispel critiques of the interim government's move.
"How can you expect to get comprehensive services after paying such a low tax? It's unrealistic," he told reporters Wednesday after a meeting of the Food Planning and Monitoring Committee at Bangladesh secretariat.
Mr Ahmed mentions that VAT has been increased by Tk 15 on spectacles. "Is there any place where you can get spectacles at Tk 125?" He asks.
"You can spend Tk 600 to Tk 700 for eating but don't want to pay Tk 20 as VAT. You can drink a cup of coffee at an outlet of Gloria Jean's but have problem to pay Tk 15 as VAT."
The custodian of exchequer of the post-uprising government concludes: "If such attitude persists, the government will face difficulties" in matters of finance and economy.
He says Bangladesh's revenue generation is very low, and "you don't have the real picture".
The adviser said he attended a meeting at the Islamic Development Bank in Jeddah few days back and there was due bill worth US$135 million against LNG import which now has been paid. Over again, a $1.0 million equivalent of dues has been created.
And the Russian ambassador recently reminded about dues against wheat imports.
Mr Ahmed mentions that some economists pay advice for expanding tax net instead of raising tax rates. "We are looking for the prospective areas."
The finance adviser said the government would try to further cut unnecessary spending. It takes 10 years to complete a project of five-year tenure. Megaprojects with a Tk 250- billion budget spent Tk 520 billion. "Can you tell from where the money will come? We have to repay the money."
Food Adviser Ali Imam Majumdar said paddy procurement by the government saw a shortage due to advance flooding. Boro season is nearing and "we are hopeful of good harvest which will help lessen import-dependence".
He said rice and wheat would be imported from multiple countries to get supply in time.
The adviser said wheat would be imported from Russia on government-to-government arrangement under deferred payment.

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