Indian cargo subject to 15pc VAT

Traders carrying transit and transshipment goods from India through Bangladesh have to pay 15-percent VAT under the bilateral water-transit protocol as an instruction has been issued to this effect.
Sources said the value-added tax or VAT would be imposed on the customs fees and charges under the Value Added Tax (VAT) and Supplementary Duty Act 2012.
The tax is levied for using the country’s water transit under the Protocol on Inland Water Transit and Trade (PIWTT) with Bangladesh.
However, the imposition of value-added tax was not mentioned in the PIWTT, signed in 1972, which left both field-level customs officials and traders confused.
A senior revenue official said as per VAT law, the tax at a rate of 15 per cent is applicable to all types of service charges unless it is exempted.
Under the provision, VAT is applicable to PIWTT transit and transshipment goods, too.
Customs officials said the National Board of Revenue (NBR) issued a letter to the Customs, Excise and VAT Commissionerate, Khulna, on May 30, 2023 instructing that VAT be charged on PIWTT goods.
They said VAT at a rate of 15 per cent had been levied on transit and transshipment goods under an agreement, signed in 2018, on the use of country’s two seaports. Equal treatment would be applied in case of the river transit, too.
Local traders too are paying 15-percent VAT on all of their services.
“There should not be any discrimination between local and Indian traders on imposition of VAT,” said one customs official about the necessity of trade parity.
The transit point has yet to emerge as a popular point of transit and transshipment of goods from India for various reasons, including unworthy infrastructures for heavy-duty transport.
Secretary of the Ministry of Shipping Mostafa Kamal says it needs a “win-win situation” between the countries to make the goods transit vibrant under the protocol.
Decision-making process moves in a slower pace as both the parties have to come into a consensus on a issue, he adds.
“We cannot take any decision against national interest. On the other side, the counterpart would not consider their cost escalation,” the official says about a dilemma.
He informed that the imposition of VAT was a proposal of the shipping ministry so that customs could collect the taxes with the services.    
About absence of the provision from the PIWTT, he said the protocol could be updated in line with the existing law of the land.
Transit and transshipment fees for PIWTT were fixed in 2016 under an order from the revenue board. Document-processing fee has been fixed at Tk 10, transshipment fee Tk 20, security charge Tk 100 and escort charge Tk 50 (if applicable).
From now on, 15-percent VAT would be imposed on the charges and fees of the schedules.
As per ‘Agreement on the use of Chittagong and Mongla ports for movement of goods to and from India’, traders have to pay Tk 30 for document processing (per chalan), transshipment fee Tk 20 (per tonne), security charge (per tonne), escort charge Tk 50 (per tonne), miscellaneous administrative charge Tk 100 (per tonne), container-scanning fee Tk 254 (per container), electric lock and seal fee (as per rules).
In 2011, India transported heavy machinery of Palatana Power Plant in Tripura through Ashuganj under special arrangements. Thereafter, India expressed interest in availing the transit facility to carry goods regularly between its two states.
The transit facility through the river ports was officially launched in June 2016.
The regular transit route stretches from Kolkata to Ashuganj through waterway and from Ashuganj to Agartala through highway via Akhaura.

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