Soaring inflation in the country has helped the National Board of Revenue (NBR) collect Tk 1,09,809 crore in VAT at local stage in the first 11 months of the just-concluded fiscal year, with witnessing an enormous growth of 15.41 per cent comparing to the corresponding period of the previous fiscal year.
Of the total, Tk 45,989 crore or around 42 per cent VAT revenue was collected from ten major sources while revenue from bidi witnessed the lowest growth and revenue from LP gas saw the highest growth of around 46 per cent in FY2023 compared to the same period of FY2022.
Petroleum gas, LP gas, POL products, beverage and construction materials, including MS rod, and cement, have emerged as most VAT contribution sources in the revenue collection.
Amidst the soaring inflation, the government should consider a lower VAT on petroleum gas to reduce the production cost, curtail subsidy as well as tame inflation, and construction materials in a bid to ensure essentials at affordable prices, insiders opined.
Due to automation and tight strategies to curb evasion, the VAT wing collected such revenue while due to a decrease in fund releasing in government projects as a result of forex reserves crunch and economic headwinds triggered by Russia-Ukraine war, the growth cannot exceed over 20 per cent, NBR officials say.
If the government decides to reduce VAT on petroleum gas, they said, they can withdraw it but it is the major revenue source in the country. So, if it happens, the government will lose more revenue. And it will be tough for the government to meet $4.7 billion loan conditions set by International Monetary Fund (IMF).
In the first eleven months of FY22, the government collected Tk 95,147 crore. Of the total, Tk 40,581 crore came from ten major sources.
Among them, the contribution of petroleum gas to overall VAT collection during the July-May period of FY22 was 2.74 per cent or Tk 2,613 crore which increased by 3.01 per cent to Tk 3,315 crore in FY23.
Due to higher prices of petroleum--the major source to produce electricity as well as industrial production, the government had increased electricity tariffs three times this year by 5 per cent each time and it was still not enough to rein in electricity subsidy.
Subsidy increased by Tk 6,000 crore to Tk 23,000 crore in the revised budget for FY23.
Besides, Energy and Mineral Resources Division hiked fuel oil prices by 42.5 per cent to 51.6 per cent in August last year. The price hikes were the highest in 20 years.
Diesel and kerosene prices increased by Tk 34 per litre to Tk 114 and octane and petrol prices by Tk 46 per litre to Tk 135. Later in the same month, the government cut fuel prices by Tk 5 per litre.
According to the new prices, diesel and kerosene is sold at Tk 109, petrol at Tk 125 and octane at Tk 130 at re-fuelling stations. The decision came a day after the NBR cut import duty to 22.75 per cent from 34 per cent.
Earlier, the Federation of Bangladesh Chambers of Commerce and Industry urged the government to lower the prices of fuel oils by withdrawing import taxes and VAT to protect the economy from the adverse impact of the price hike of fuel oils.
The apex trade body of the country sent a letter to Prime Minister Sheikh Hasina in this regard, seeking her instructions to withdraw duties and VAT on fuel oils and readjust the prices to reduce production costs.
However, the contribution of LP gas to overall VAT collection was 0.41 per cent or Tk 449 crore during the abovementioned period in FY22, which rose by 0.52 per cent to Tk 574 crore in FY23. Besides, it has witnessed the highest growth of 45.76 per cent among top ten sources.
MS rod’s contribution to overall VAT collection increased by 0.94 per cent to Tk 1,042 crore in FY23, which was 0.78 per cent in FY22 and cement’s contribution rose to 0.65 per cent from 0.54 per cent.
According to Trading Corporation of Bangladesh (TCB), on June 22 this year, MS rod was sold in between Tk 95,000 and Tk 1,01,500, up by 14.20-16.22 per cent or Tk 10,000-15,000 comparing to the same day a year ago.
“We have to increase the prices as we have to pay high VAT and tax. This is also hindering our industrial growth. With such kind of tax structure, we can’t run our business smoothly and the general people can’t continue with their construction work,” said Sumon Chowdhury, Vice President of Bangladesh Steel Manufacturers’ Association (BSMA).
“We demanded the government reduce VAT from Tk 1,200 to Tk 450 on all kinds of billet and ingot pro-duced from meltable scraps sourced from local or abroad, reduce VAT from Tk 1,200 to Tk 450 on all kinds of MS steel manufactured from billet and ingot, and reduce VAT from Tk 2,200 to Tk 900 on all kinds of billet and ingot produced from meltable and for all kinds of MS steel manufactured from billet and ingot,” he added.
Besides, the contribution of cement was 0.54 per cent to Tk 522 crore in FY22, which increased by 0.65 per cent to Tk 718 crore in FY23, and beverage witnessed 1.22 per cent contribution to Tk 1,343 crore in FY23, up from Tk 1,168 crore, a 1.08 per cent contribution in previous FY.
POL products contributed Tk 1,400 crore (1.27 per cent) to revenue collection in FY23, up from Tk Tk 1,163 crore (1.22 per cent) in FY22.
