Home ›› 01 Jun 2023 ›› Front
With a view to taming the soaring inflation, the government is likely to withdraw the existing 15 per cent VAT on fuel oil imports in the fiscal year 2023-24.
Finance Minister AHM Mustafa Kamal is likely to make the announcement while placing the Tk 7,61,785 crore budget for FY24 in parliament today.
The move is aimed at reducing the fuel subsidy burden as the government is going to withdraw subsidies on fuel and electricity in the future. It will cut production costs, which will then help reduce inflation.
To lessen the mounting pressure, including the forex crunch, caused by economic shocks, stabilise prices in the local market amidst the soaring inflation, and increase exports by providing policy support, the government will cautiously take fiscal measures for FY24.
Amid the ongoing crisis, the government will bring some changes in the duty structure at the import stage and impose other taxes in the Finance Act for FY24 to collect more revenue and meet the International Monetary Fund (IMF) conditions for the $4.7 billion loan programme.
Fuel import VAT withdrawal
The government is going to withdraw VAT on the imports of fuel oil, including petroleum, crude oil, jet fuel, and furnace oil, after hiking the prices of fuel and electricity several times in recent past in a bid to lower subsidy pressure on electricity and local production costs.
It increased electricity tariff three times this year – each time by 5 per cent – but still that was not enough to rein in electricity subsidies. The subsidy was increased by Tk 6,000 crore to Tk 23,000 crore in the revised budget for FY23.
Fish import SD to go
Due to higher fish prices in the local market, the government is likely to withdraw the existing 20 per cent supplementary duty (SD) on the import of fresh or chilled fish, excluding fish fillet and other fish meat. But the existing 20 per cent SD on pacific salmon and tuna type fish is likely to exist.
The government is likely to impose a 20 per cent SD on the import of fruits, nuts, and other edible parts of plants that are prepared or preserved whether or not containing sugar or sweetening matter or spirit.
At the same time, the government may withdraw SD on the import of plastic tableware and kitchenware, feeding bottles, and others. In contrast, it is likely to impose a 7.5 per cent VAT on plastic tableware, kitchenware, home appliances, and hygiene and toilet goods.
The government may withdraw SD on the import of toilet paper, tissue paper, towel or napkin paper and sanitary goods and then impose a 7.5 per cent VAT on some cases of kitchen towel, toilet tissue, facial and pocket tissue, and hand towel.
VAT withdrawal to raise local production
The government is likely to withdraw VAT on the import of all types of turbojets, lifts, skip hoists, linear alkylbenzene imported by industrial import registration certificate (IRC) holders, insulated or reefer containers, and other types of containers.
At the same time, businesses may enjoy no VAT facility for local production of coconut or copra waste. The VAT on synthetic filament yarn, single yarn, and unbleached or bleached woven fabrics may be withdrawn.
VAT on man-made fibre fabrics
Consumers are likely to pay more to purchase non-cotton clothes as the government may impose a 5 per cent VAT on the import of synthetic and artificial yarn and fabrics.
Finance ministry officials said the move is aimed at giving privilege to local synthetic and artificial yarn and fabrics manufacturers, which will encourage entrepreneurs to set up factories, create employment, save foreign currency, and increase government revenue.
Export-oriented readymade garment manufacturers, however, will be exempted from the VAT as they are enjoying duty-free import facilities under bond licence. But if any exporter exports clothes without having the licence, they will also have to pay the VAT.
Meanwhile, the government plans to halve VAT on sweet to 7.5 per cent from the existing 15 per cent. Besides, handmade cake and biscuit producers are likely to continue to enjoy much lower VAT.
The government is also considering an extension of the VAT waiver enjoyed by cake and biscuit producers with more facilities amidst the sharp rise in raw material prices.
In FY24, the government may increase the zero VAT facility for per kg handmade biscuit production with a value of up to Tk 200, up from Tk 150, and for handmade cake with a value of up to Tk 300, up from Tk 250.
The government may impose a 7.5 per cent on importing sunglasses.
Software policy support withdrawal
The government is going to withdraw policy support for making software. Currently, software makers enjoy VAT-free facilities for software production.
Besides, the government is likely to withdraw VAT exemptions for database, operating systems, development tools, and productivity and communication or collaboration software for automatic data processing machine production.
Besides, the VAT-free facility for producing ball point of ballpoint pen will likely be withdrawn.
Cigarette prices may be raised
The government is likely to set cigarette prices at a minimum of Tk 45 per 10 sticks for low-tier, Tk 67 for medium-tier, Tk 113 for high-tier, and Tk 150 for premium-tier ones.
In FY22, the National Board of Revenue (NBR) collected around Tk 28,000 crore in VAT from the tobacco sector, which accounted for around 30 per cent of the revenue collected by the VAT wing.
The VAT wing aims to collect Tk 5,500-6,000 crore by restructuring cigarette taxation, and turnover tax will be a key source of collecting more revenue from the sector, finance ministry officials said.
