Home ›› 18 May 2023 ›› Front
The National Board of Revenue (NBR) is likely to withdraw all sorts of tax rebates in import of essential goods used in hotel construction and decoration in the upcoming fiscal year 2023-24 (FY24).
The move is expected to hit hard the country’s tourism and hospitality sector hard, which lacks adequate standard hotels with top-notched facilities for local and international delegates.
The NBR has been providing a massive duty exemption on importing at least 50 items including interior decoration, cooking, firefighting and building security equipment, and furniture, lighting and health club equipment.
But finance ministry sources said the facility is expected to be withdrawn in the upcoming budget for FY24.
Industry insiders fear that the move will hinder star-rated hotels recovery from Covid-19 pandemic shock. Also, as hotel costs are expected to go up, attracting guests will be harder after the long dry spell created due economic shock triggered by the pandemic and Russia-Ukraine war.
They said the NBR decision will affect the hospitality sector’s survival and desired growth in the country.
NBR in 2014 introduced a nearly 100 per cent duty exemption facility on the materials imports required for construction of standard residential hotels to expand the hotel and tourism sector and encourage constructing standard hotels for providing best services towards local and foreign guests.
In a Standard Regulatory Order (SRO) issued at the time, the NBR stated that only 5 per cent duty will be applicable on essential and capital machinery related equipment imports for the hotels and all other duties will be exempted.
The order further stated that the duty was exempted on 42 HS code products in seven categories of hotel construction materials.
Prior to that there was an average of 110 per cent duty on such material imports, NBR sources said.
Later in FY22, the NBR set a 10 per cent duty on materials import and exempted other duties including regulatory duty, VAT and supplementary duty.
In the SRO, the NBR included more required and updated items for decorating and furnishing to improve hotel standards compared to the previous order, and continued to provide the duty exemption facilities.
However, the sector is yet to flourish up to mark with the growth remaining below the expected level. Hence, the NBR has decided to withdraw the duty exemption facilities, finance ministry sources said.
Meanwhile, experts said the government should give policy support towards the sector for a long period instead of lifting exemption facilities.
According to industry insiders, the move will affect the tourism industry, cause decline in foreign currency, discourage investors and result in a huge number of job losses as well.
India offers policy support through providing tax holidays for five years but we could not get such support, they said.
Seeking anonymity, the owner of a reputed hotel said if the government gives tax holidays for 5-10 years, withdraws the imposed higher duties, the sector will be a potential source to increase foreign currency, create more employment, and attract investors.
Hotel owners said there is a huge duty imposed on essential goods and services in Bangladesh compared to neighbouring India, and Malaysia, Thailand, and Singapore. That is why the sector is yet to flourish as expected.
Tourism is a special sector because the owners earn foreign currency that helps mitigate forex volatility pressure, and generate quality and skilled employment. If the government withdraws support for it, the GDP may suffer.
The contribution of the tourism sector was 2 per cent of the GDP before the Covid-19 but now it crosses 3 per cent of the GDP. Bangladesh aims to touch double digit contribution of the GDP as per the master plan of the Bangladesh Tourism Board.
Currently, the sector is facing a lot of difficulties in importing essential goods like meat, and paying high duties on imports which are essential to ensure quality hospitality, hindering services towards international guests, industry insiders said.
Foreigners main customers in star-rated hotels
There are 18 five-star hotels in Bangladesh—nine in Dhaka, four in Cox’s Bazar, one each in Chattogram, Jashore, Bogura, Moulvibazar and Habiganj. There are six four-star hotels and 20 more three-star hotels across Bangladesh.
Insiders said that 90 per cent of the guests in five-star hotels in Dhaka and Chattogram are usually foreigners, particularly buyers in the garment sector, inspectors or employees of various projects and officials of diplomatic missions and international organisations.
Star-rated hotels in Bangladesh have two business orientations. One group, which have their business centred around tourist destinations, mainly focuses on tourists and tries to meet their requirements.
The other group, mostly situated in major cities, focuses on international trade and business.
According to an estimate of the Bangladesh International Hotel Association, the industry has Tk 3,500 crore from March 2020 to October 2021 due to the Covid-19 pandemic.
