Nearly 500 agro-processing units of the country are likely to suffer a major blow after the new Value Added Tax (VAT) law takes effect from July 01 next, sector insiders fear.
According to them, imposition of new VAT will put an adverse impact on the agro-processing sector as it is now paying different taxes and duties to the government.
"Prices of some essential agro products might increase tenfold if the government imposes 15 per cent VAT instead of the existing tariff according to the new VAT law," General Secretary of Bangladesh Agro-Processors' Association Khurshid Ahmed Farhad told the FE on Monday.
Besides, the owners of a good number of agro industries especially medium and small industries may face serious setback to run their units due to payment of VAT. Even many units may turn into sick ones, he said.
Some 489 agro-processing units are the members of the association. Besides, there are many units across the country, which are not the members of the association. Some 1.5 million people are involved with the industry, he mentioned.
Presently, the agro-processing industry pays 37 per cent corporate tax. The sector has also been paying 5.0 per cent advance tax on import and 1.0 per cent duty on import of capital machinery, according to people involved with the sector.
Now the government provides tax holiday facility to the new agro-processing industry to seven years since its inception.
At least 40 countries in the globe are the consumers of Bangladeshi agro products.
The agro-processing sector earns a significant amount of foreign currency every fiscal year (FY). It earned some Tk 16.0 billion in last FY, an association data showed.
It is possible to earn over Tk 100 billion in the next five years through export of products if the sector gets necessary support from the government, according to the data.
The association has recently sent a set of recommendations to the ministry of commerce (MoC) for development of the agro-processing sector.
It has sought subsidy for the country's manufacturers and exporters and different facilities for promoting the sector.
Corporate tax should be set at 20 per cent, they said in a letter. The rate of other tax and duty should be fixed at reasonable level for the sake of the country's economic growth, the letter added.
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