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Proposed taxes to push up cement prices by 10pc

Cement makers anticipate

FE Report | June 25, 2019 00:00:00

The production cost of cement might go up by 10 per cent if the government imposes advance tax (AT) on the import of raw materials as proposed in the national budget for 2019-20, cement manufacturers said on Monday.

Such a hike in cement prices would lead to an increase in the cost of not only private infrastructure projects but also various government projects, including the Padma Bridge, Dhaka Metro Rail and the Rooppur Nuclear Power Plant, they observed at a post-budget press conference.

In the national budget for the upcoming fiscal year, the government has proposed a 5.0 per cent AT on import of many basic raw materials and additives required for manufacturing cement.

At the press conference held at its office in the city, the Bangladesh Cement Manufacturers Association (BCMA) demanded withdrawal of the proposed AT and a review of the advance income tax (AIT) provision for the sector.

BCMA President Mohammed Alamgir Kabir, First Vice President Md Shahidullah and Executive Director Md Bellal Hussain Mollah spoke at the event.

Mr Kabir presented a keynote paper, mentioning that the budget for the FY '20 has proposed a 5.0 per cent AT on all kinds of raw materials and additives needed for cement manufacturing.

Besides, the existing 5.0 per cent advance income tax (AIT), which was refundable and adjustable to profits, has been proposed as 'final tax incidence', according to the paper.

Cement manufactures have already been paying 3.0 per cent AIT at source at the supply stage for the domestic market and it is considered as final tax incidence, it said.

But from the next financial year, a total of 8.0 per cent AIT will be considered as 'final tax incidence', the association claimed.

The keynote paper said the cement industry totally depends on imported raw materials. So, if it doesn't get the exemption from 5.0 per cent AT on imports, the companies will have to make 55 per cent gross profit and 15 per cent net profit in the post-production stage, it added.

Mr Kabir said: "We have to raise the cement price by Tk 42.77 a sack (10 per cent) if the new tax provisions are implemented."

"But it won't be possible as such price fixation will not be market-friendly, as it would affect both production and sale and might disturb the stability of the industry," said Mr Kabir, also the managing director of Crown Cement.

Md Shahidullah said: "The country's cement sector is totally import-dependent for raw materials. So, the taxation should be rational for survival of the sector."

After meeting the domestic demand, local companies are now even exporting cement, he said, adding that the rising production cost would make the companies less competitive.

The BCMA demanded withdrawal of the 5.0 per cent AT on raw materials at import level.

It also demanded that the 5.0 per cent AIT be treated as refundable and adjustable.

The association also demanded that the government consider the 3.0 per cent AIT at source (at cement supply at domestic level) also as refundable and adjustable.

The BCMA said the sector had seen 10 to 15 per cent growth in the last few years. The annual turnover now stands at Tk 250 billion.

Bangladesh produces more than 30 million tonnes of cement annually, it said, adding that the capacity of production will increase to 55 million tonnes within a few years.

About 2.5 million people are directly or indirectly employed in the sector, the association said.

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