The Federation of Bangladesh Chambers of Commerce and Industry at today’s joint budget consultative meeting is going to press for its demand for multiple rates of value-added tax based on value addition in different sectors instead of the 15 per cent set in the new VAT law for all goods and services.
The apex trade body will also demand setting VAT at 0.5 per cent for retailers and shopkeepers in the new law, according to the FBCCI budget proposals which will be placed before the meeting where finance minister Abul Maal Abdul Muhith will be present.
The National Board of Revenue and the FBCCI every year jointly arrange the meeting to discuss the demands from the business community for the next national budget.
The FBCCI has already submitted a set of 424 proposals related to new VAT act and rules, customs duty and income tax to the revenue board for consideration for the upcoming national budget for the fiscal year 2017-2018.
According to the proposals, the FBCCI recommended increasing the tax-free income ceiling for individual taxpayers to Tk 3.25 lakh from the current Tk 2.5 lakh and introduction of the lowest rate of income tax at 5 per cent which is now 10 per cent.
The apex trade body also demanded reducing corporate income tax rates to 22.5 per cent for publicly listed companies and to 30 per cent for non-publicly listed companies, which are now 25 per cent and 35 per cent respectively.
Corporate tax rate for publicly listed banks should be lowered to 37.5 per cent and for non-publicly listed banks to 40 per cent from the current 40 per cent and 42.5 per cent respectively, it said.
The new VAT and Supplementary Duty Act-2012 which is set to come into effect from July 1 is expected to dominate the discussion at this year’s meeting as most of the trade bodies are opposing the uniform 15 per cent rate of VAT stipulated in the law.
Under the law, 15 per cent VAT will be imposed on almost all goods and services, many of which enjoy either full VAT exemption or reduced rates under the existing law, on the total value of taxable import and taxable supply.
The FBCCI said that the VAT system would become an excise duty if the 15 per cent VAT was imposed on total sales price.
VAT should be only on the value-added portion of the sales value and this is the basic principal of VAT system, it said.
The federation will demand amendment to the new law to make the VAT system friendly to small and medium enterprises and traders.
On the other hand, 15 per cent VAT is much higher for many sectors.
The FBCCI proposals also include setting the VAT rate at 1.5 per cent on sales of residential apartments calculating the 15 per cent VAT based on 10 per cent assumed value addition.
In the same manner, the VAT rate should be 0.75 per cent for iron and steel products such as rod, 1.5 per cent for jewellery sector, brick kiln and supply of land for construction of residential apartments.
VAT rate should also be 4.5 per cent for those businesses who will not be able to enjoy input credit benefit, it said.
The FBCCI will also demand increasing the VAT-free annual turnover limit to Tk 50 lakh and the upper ceiling on annual turnover for imposing turnover tax to Tk 5 crore from the current limit of Tk 30 lakh
and Tk 80 lakh respectively.
Generally, the rate of turnover tax will be 3 per cent with scope for adjustment with VAT paid in advance but for traders the rate should be 2 per cent.
The apex chamber also recommended offering 10 years tax holiday facility for investors in the special economic zones.
The FBCCI also proposed the government to continue zero and 1 per cent duty on the existing products and to keep supplementary duty on import of locally produced products to protect the local industry from uneven competition from imported goods.
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