Local manufactures also getting costlier with VAT hike

Local manufactures like refrigerator, AC, mobile set and LPG cylinder also may get costlier for tax hike as financial reform necessitates lowering tariff protections to domestic industries.
Sources say the local manufacturers of electrical and electronic products may see a tax hike in the upcoming fiscal year under government plan to trim down protective tariffs.
The VAT wing of the National Board of Revenue (NBR) is likely to increase the taxes on manufacturing of air conditioners, refrigerators, and mobile-phone sets in the 2024-25 budget, coming next month.
Also, the value-added tax or VAT on liquefied petroleum gas (LPG) cylinder manufacturers may see a hike.
Revenue officials said VAT would be increased as a part of exercise to phase out the tax exemptions from the well-established sectors to prepare for Bangladesh's graduation to a middle-income country in 2026 so they can play in competitive business regime.
"A number of sectors may see a 15-percent standard VAT rate in the upcoming fiscal year as the NBR moves to come out from the multiple rates of VAT," said the NBR official.
"Multiple rates of VAT affect the small and medium enterprises as their actual tax incidences go above 15 per cent for not having input credits," he added.
The revenue board started the process of phasing out protective tariffs during the last three years.
Currently, there is no VAT on manufacturing stage of AC while refrigerator manufacturers are subject to paying 5.0 per cent.
As per fiscal measures of the current financial year, mobile-phone manufacturers/assemblers are subject to paying 2.0-percent VAT instead of zero-rated tax, 5.0 per cent instead of 3.0 per cent, and 7.5 per cent instead of 5 per cent respectively at the local stage until June 30, 2024.
Manufacturers of LPG cylinder are paying VAT at a cut-down rate of 7.5 per cent.
Official sources have said the reduced rate of VAT would be increased to 15 per cent gradually to make the standard rate of VAT effective.
Surgical items may also see a tax hike at local stages in the upcoming FY, they said.
The government's revenue authority is acting under cajoling for raising revenue collection through fiscal reforms to enhance the country's tax-GDP ratio in order to make for budget shortfall.
Contacted, the spokesperson for country's one of the largest manufacturers of refrigerator, AC and mobile set, Walton, declined to make preemptive comment before it comes in the budget proposal.
In the FY24 budget, the government has extended the VAT-exemption facility for production of a slew of electronic equipment until June 30, 2026.
The waiver list includes computers, laptops, desktops, notebooks, notepads, tablets, servers, keyboards, mouse, RAM, PCBA or motherboards, mobile-phone chargers and batteries, power banks, routers, network switches, modems, network devices or hubs, speakers, sound systems, and earphones, until June 30, 2026.

[email protected]