NBR at loggerheads with DMTCL

Though the National Board of Revenue (NBR) is seeking VAT on metro rail fares as per the law, Dhaka Mass Transit Company Limited (DMTCL) has refused to pay saying that there is no class for passengers.

Showkat Ali Saadi, commissioner at the Customs, Excise & VAT Commissionerate, Dhaka (South), had written to DMTCL, informing them to cut 15 per cent VAT on fares for metro rail passenger services.

In reply to the letter, DMTCL in a letter said, “It is not possible for the company to operate metro rail profitably only with its income from passengers as we saw in different countries.”

The commissioner later wrote a letter to the NBR, urging it to take necessary steps for collecting VAT from metro rail passenger services.

According to the revenue board, Value Added Tax (VAT) is applicable at the rate of 15 per cent on AC and non-AC railway services. But DMTCL claims that as there is no class for metro rail and metro rail passengers, no tax is applicable on metro rail passenger services.

NBR sources said that as per Section-26 of Value Added Tax and Supplementary Duty Act 2012, the revenue board did not yet grant any exemption on passenger transport services regarding air-conditioned and first class non-AC railway services.

Since metro rail is fully air-conditioned, currently 15 per cent tax is applicable on air-conditioned railway services, they added.

DMTCL in the letter said, “The governments subsidise the metro rail companies to meet the operating cost in those countries.”

“In consequences, the company has also requested the finance division to provide a subsidy of Tk1,000 crore for the MRT line-6 operation and its maintenance.”

Citing the opinions of experts, the company further said that Dhaka city is causing a loss of about Tk40,000 crore annually due to huge traffic congestion.

“If the MRT is fully operated, the losing cost will be saved and the saved money can be invested in the economic development of the country,” the company said in the letter.

“In this regard, it said metro rail is for all and there is no class for passengers. So, no tax can be imposed on metro rail passenger services,” it added.

Seeking anonymity, an NBR official said that according to the law, VAT is applicable on metro rail passenger services.

As metro rail is a mega project of the government and it is operated for the public, tax issue has to be settled through a meeting whether VAT shall be withdrawn or not. It seems that there is no possibility for collecting VAT from metro rail services, he added.

DMTCL started partially metro rail service carrying passengers commercially since December 29 last year.

Prime Minister Sheikh Hasina inaugurated the metro rail service from Diabari in Uttara to Agargaon on December 28 the same year. The Agargaon-Motijheel portion of metro rail is expected to be started by the end of this year and the Motijheel-Kamalapur section is likely to be launched by 2025.

The cost of the MRT Line-6 project is estimated at Tk 33,471.99 crore.