Home ›› 25 Aug 2022 ›› Editorial
Bangladesh is going to join the developing countries club within the next four years; preparation is underway in which easy affordability of business start-up licenses is one of the priorities. Trade License is one of the mandatory requirements to start a business; nonetheless businesses have to face hassle and stress to avail of this primary document before starting a business. e-Trade license has been introduced, however, the digitization process is partial, and not able to benefit the businesses.
BUILD, a private sector think-tank, identified 15 licenses required for a manufacturing unit to start its business. To face graduation challenges, a core committee under the chair of the Prime Minister’s Principal Secretary is working.
Out of the seven Sub Committees, the export diversification committee, chaired by Commerce Ministry’s Sr Secretary, identified 33 licensing agencies to lead the business.
In this list, one of the primary regulatory requirements is the trade license which should be instant within a day maximum, still, it requires 3-7 days sometimes more. There are no fixed costs, processes and time frames to get the license.
In a recent dialogue organised by BUILD, it is seen that in Gazipur City Corporation (Savar, Ashulia and Gazipur areas), anyone has to take a permission letter from the concerned regulatory authorities before applying for the trade license which costs around TK 20,000.
Requirements of documents for trade license are not very high, however, the process of providing trade license is different in various regulatory agencies, and thus entrepreneurs feel confused causing delays.
Trade License has been issued based on the Local Government (City Corporation) Act 2009, Municipal Taxation Rules, 1986 and the City Corporation Ideal Tax Schedule 2016.
Trade Licenses are issues under two categories (Commercial and Manufacturing) for various kinds of business entities. At present, 12 city corporations, municipalities of the concerned areas and union parishad provides trade license for the respective areas.
Types of forms, documentation requirements and the process of obtaining a trade license depend on the nature of trade.
Application form charge is Tk 10, and license fees range from Tk 100- Tk 50,000 (City Corporation, Dhaka and Chattogram-Tax-Model-Shedule-2016,), Tk 100- Tk 25,000 (Other City Corporations) and Tk 50- Tk 12,000 (Satkhira Municipality) depending on the nature/type of business).
The usual time for issuing a trade license is 3 to 7 days while renewal takes 1-2 days. A licensed book and a Challan book are given at the time of issuing the license which is valid for 5 years.
City Corporation Ideal Tax Schedule 2016 included 295 main types of businesses, under main and sub-category, the total business entity types are 491.
New and renewal fees for all types of trade license is the same. There are associated costs such as; signboard cost which is Tk 80 per square feet, plus 15 per cent VAT on trade license is included.
On top of it depending on business type, income tax in the amount of Tk 500-Tk 3000 is imposed on the renewal fee (Ref: Income tax Ordinance 1984; Section: 52K). Sur- Charges are also imposed, if the renewal is not completed within September, 30 of every FY, monthly Tk 100 or 10% additional charge which one is higher will be imposed.
According to website sources, revenue generated by Chittagong City Corporation under this head was only Tk 8.05 crores (2013-14) while it was Tk 8.38 crore by Gazipur City Corporation (2018-19), the same figure seen in Rangpur City Corporation is only Tk 3-4 crore on an average.
Dhaka South City Corporation Budget was Tk 90 Crore in 2019-20, which was Tk 76 crore in 2018-19.
Similar is the case of Dhaka North City Corporation, revenue was Tk 67.93 crore (20-21), and Tk 100 crore (2019-20 Budget), while Tk 60 crore in the 2018-2019 budget.
Income from other sources such as holding tax, advertisement, property registration, roads and bridges construction, schools, colleges and hospitals maintenance are some service areas where local government authority collects revenues.
The trade license application and renewal forms of all city corporations are available online presently. There are 3 types of Forms (Trade License Form, Form K and Form-I) available on the website (http://forms.mygov.bd/site/view/category_content). All types of forms are editable in the PDF format in the case of DNCC, DSCC, NCC, RCC and SCC.
However, the links of the forms are not working in case of RCC (Rangpur), CCC (Chattogram), CCC (Cumilla), KCC (Khulna). In case of Municipalities and Union Parishad, forms are not available online.
All the application forms are developed in Bengali except ‘Form-K’ is bilingual partially. Trade license Book is also provided only in Bengali. The requirement of commercial business space is a burden for small entrepreneurs. Especially, providing address of the entity for online/e-commerce business for obtaining TL is a concern. In most of the cases, the trade license issuing process is manual and time-consuming. In addition, there is no unified method for trade license in terms of City Corporation, Municipalities and Union Parishad. Businesses working in different geographic locations are required to obtain a separate trade license for each location, different trade licenses are required for head offices and factories.
Different kinds of forms create confusion, thus a single, unified and simplified form is required for all types of businesses.
According to Income tax Ordinance 1984; Section: 52K; any person responsible for renewal of a trade license will collect tax at the time of such renewal of each trade license at different rates, such as; Dhaka South City Corporation (DSCC), Dhaka North City Corporation (DNCC) or Chittagong City Corporation(CCC) presently requires Tk 3000 which was Tk 500 in 2015.
In any other city corporation, the present tax amount is Tk 2000 which was Tk 500 in 2015.
In any municipality at any district headquarter, the tax amount is Tk 1000 (It was Tk 300 in 2015), while in any other municipality the amount is Tk 500 (It was Tk 100 in 2015). The cost of renewal for small businesses creates a burden.
According to City Corporation Ideal Tax Schedule 2016, under different small organization/shop categories, betel leaf/ betel nut shopkeeper (Tax-Model-Schedule-2016 (78) has to pay Tk 500 for trade license while schedule fee for mechanical vehicle/transport producer category, truck/tanker/bus (Air conditioned) is also Tk 500 and schedule fee for baby taxi/ mishuk (Tax-Model-Shedule-2016) (43, kha) is Tk 100.
In most cases applicant depends on third-party for trade lience issuance and renewal which increases cost. Officers engaged in providing trade licenses in some municipalities are receiving training from the Local Government Division (LGD) but to date, it is inadequate for them to implement the full phase of the digital process.
Businesses recommended that some of the processes can be reduced and the requirement of days should be reduced to 1 day in case no inspection is required. It can be termed as Business Registration as it serves the initial business starting requirement for all types of entities in Bangladesh.
Countrywide single Business Registration (Trade License) online could be introduced immediately as like in developed countries.
Simplified and digitized trade license issuance and renewal process including online payment need to be implemented immediately. As online/editable forms are already in place in the case of some city corporations so a single unified and simplified trade license form should be introduced in all city corporation/union parishad, municipalities etc.
As Form-K’ is bilingual partially so, Bilingual (Bengali and English) application and renewal trade license forms and books should be introduced in all tiers of local government.
Businesses will be happy to get the trade license for maximum of 5 years as per their need and reduce time. In the City Corporation Ideal Tax Schedule 2016 (Bangladesh Gazette, additional, January 31, 2016), on page 967, under clause 10 (3), it is mentioned that yearly trade license fees can be collected together for a maximum of 5 years and in case increase and decrease of fees it will be adjustable. So, a Trade License can be issued for maximum of 5 years.
A trade license requires a commercial address which is difficult for e-commerce, f-commerce or any type of online business, UBID (Unique Business Identification Number) has been introduced by the Ministry of Commerce and implemented through RJSC and also needs hassle free implementation and can be a substitute for trade license.
To remain sustainable after graduation, the cost, time, and process of doing business somehow has to be reduced for competitiveness. There are several other licenses required to run a business, as the first primary requirement Trade License should be as much as simple and instant.
The writer is CEO of BUILD a Public Private Dialogue Platform. She can be contacted at [email protected]
