The proposed national budget for FY2024-25 will have a negative impact on 16 listed companies of seven sectors as it will increase the burden of additional tax, VAT and supplementary tax on them at the end of the fiscal year, compared to the previous one.
The sectors on which the budget will have this direct impact are the telecom, light bulb, fuel and power, construction, food, air-conditioners (AC)/refrigerator and tobacco sectors, EBL Securities said in a review of the proposed budget recently.
Stock market analyst and former Dhaka University economics professor Abu Ahmed said that nothing has been kept directly for the capital market in the proposed budget. However, some listed companies have benefited indirectly. At the same time, additional tax has been imposed on some companies.
"The government should have looked at how to bring more companies to the capital market instead of trying to collect taxes from the companies indirectly,” he said.
He said that the government could have collected more from the capital market if it proposed to increase the difference in corporate tax rates for listed and non-listed companies.
AC/refrigerator, light and construction
Consumer electronics sector companies listed in the capital market are facing additional taxes and VAT in the proposed budget. This will increase their production costs at the end of the year. Besides, the companies that get a 100 per cent tax holiday will be deprived of this benefit.
The budget has proposed 15 per cent VAT instead of the existing 5 per cent at local manufacturing on energy-saving bulbs (1 to 50 watts) and 10 per cent import duty on the raw materials of LED lamps and energy-saving lamps.
It also proposed 7.5 per cent VAT on ACs at the local manufacturing stage and 7.5 per cent VAT instead of 5 per cent at the local manufacturing of refrigerators and freezers.
The budget also proposed 1 per cent CD for the import of capital machinery and construction material by the industries in hi-tech parks and 5 per cent CD on imports for developers of hi-tech parks. At the same time, all other duties and taxes, except CD, will be applicable for vehicles imported by establishments within the hi-tech park.
As a result, Walton Hi-Tech Industries PLC, Singer Bangladesh Limited and Bangladesh Lamps Limited will face the negative impact of the budget at the end of the year.
In its analysis, EBL Securities said that the cost of locally manufactured LED/tube light/energy-saving lamps may increase, potentially impacting the top line. The cost of locally manufactured ACs, refrigerators and freezers will rise, while domestic branded products may lose cost differentiation advantage against imported counterparts.
Tobacco
The minimum price has been increased for all four segments of cigarettes in the proposed FY25 budget. Supplementary duty for the lower segment has been increased by 200 basis points. For the other three segments, supplementary duty has been increased by 50 basis points.
The budget has also proposed to increase VAT from 7.5 per cent to 15 per cent at the local manufacturing stage on cigarette/bidi paper.
British American Tobacco Bangladesh Company Limited, the only listed tobacco company, will face a negative impact at the end of the year after the budget proposals are passed.
Also, the higher supplementary duties will further increase tax expenses. Increased VAT on cigarette paper will also have a negative impact on all tobacco companies.
British American Tobacco Bangladesh has already reported revenue de-growth of 12.07 per cent in the first quarter of FY2023-24 due to a decline in volume sales.
Fuel & power
Custom duty for importing plant, equipment and erection materials by power companies has been raised to 5 per cent from zero per cent in the proposed FY25 budget.
Import duty for materials used for establishing or operating CNG/LPG stations has been raised to 5 per cent from 3 per cent.
Costs of building and maintaining power plants and establishing or operating CNG/LPG Stations will go up. On the other hand, the gross revenue of the furnace oil, base oil and lubricating oil manufacturers will increase, said EBL Securities in its budget review.
Listed power-producing companies MJL Bangladesh PLC, Padma Oil Co Ltd, Jamuna Oil Company Limited, Meghna Petroleum Limited, Intraco Refueling Station Limited and Energypac Power Generation PLC will be exposed to negative conditions at the end of the year.
Food & allied
The budget proposed 10 per cent SD on all kinds of ice cream instead of the existing rate of 5 per cent. Some 30 per cent SD on carbonated beverages (containing 145 mg/per litre caffeine) have also been proposed instead of the existing 25 per cent.
Also, 15 per cent VAT at the local manufacturing stage on mango bar, mango juice, pineapple juice, guava juice and tamarind juice instead of 5 per cent has been proposed.
Under the circumstances, Golden Harvest Agro Industries Ltd, Taufika Foods and Lovello Ice-cream PLC, Rangpur Dairy and Food Products Ltd, and Agricultural Marketing Company Ltd will face the negative impacts of the FY25 budget at the end of the year.
Telecom
The budget also increased supplementary duty on the SIM/RUIM card-enabled mobile telecom service from the existing 15 per cent to 20 per cent. VAT on the supply of each SIM/e-SIM has been raised from the existing Tk 200 to Tk 300.
Because of this, the cost of sales for the telecom companies will increase, which is likely to affect their bottom line, said EBL Securities.
Grameenphone Ltd and Robi Axiata Limited will be exposed to negative conditions at the end of the year.
