VAT on Indenting impacts export earnings negatively

VAT on Indenting service export is still imposed @ 5% though Indenting service is an export sector and as per Clause 24 of the VAT Act-2012, there should not be any VAT on it.

Indentors export their services abroad to the foreign suppliers/manufacturers and earn foreign currency for Bangladesh through banking channel. They are one of the important sources of earning foreign currency and promotion of business and economic activities of Bangladesh. An Indentor is the authorized representative of foreign companies to promote and sell their products and services in Bangladesh market with competitive price and after sale services as well. They also ensure quality raw materials and capital machineries to the export oriented industries. As such, Indentors have vital role both in import and export trade of the country. However, their source of income solely originates from abroad since they earn foreign currency by exporting their services to those foreign companies/manufacturers/suppliers. Their value addition in this sector is 100 percent. Indentors have been receiving Export Registration Certificate (Indenting Services) from CCI&E since 2018 although they have been enriching government exchequer by earning foreign currency since 1978.
Presently more than 1700 Indenting firms are registered with Bangladesh Indenting Agents' Association (BIAA), the Apex Body of all the Indentors all over Bangladesh. After getting Membership of BIAA, they are to take ERC (Indenting Services) from CCI&E and abide by all rules and regulation of the country in force while operating their indenting business. BIAA has been playing due role in enterprise creation encouraging new Indentors to flourish the sector. BIAA has actively been supporting the government in forming business friendly policies to increase trade and commerce of the country. As a smart means of business, fresh graduates have also been exploring the sector being trained by BIAA.
In the last fiscal year, Indentors repatriated USD 115.1 against their services exported to the different countries of the globe. As per Bangladesh Bank statistics, their contribution as service exporters has been increasing significantly in each fiscal year.
However, VAT on Indenting service export is still imposed @ 5% though Indenting service is an export sector and as per Clause 24 of the VAT Act-2012, there should not be any VAT on it. In spite of several recommendations from FBCCI even from Ministry of Commerce, Ministry of Planning to impose VAT @ 0% on this service export sector, still VAT on this service export sector is imposed @ 5% which is not only contradictory to law but also discourages governments plan for exploring and diversifying export sectors of the country. Of late, Bangladesh Trade and Tariff Commission in their research paper clearly suggested to impose VAT @ 0% to this service export sector. They also suggested to provide all admissible benefits as like other export sectors of the country. They forwarded the copy to the NBR by far for taking required step.
If imposition of 5% VAT continues on this service export sector, it will create negative impact both in import and export trade of the country as indentors not only promote almost all sorts of quality products & services to the Bangladesh market but also provide all kinds of capital machinery and raw materials to the export oriented industries/manufacturers of the country. To flourish this export sector, it is now high time to let the sector grow further to earn more foreign currency as export earnings against Indenting services and contribute more for economic growth of the country.

The writer is executive secretary of Bangladesh Indenting Agents' Association