The government is likely to backtrack on its plan to withdraw the import-stage supplementary duty imposed on around 1,192 products amid strong oppositions from the domestic producers on grounds of local industry protection.
Officials of the finance ministry and the National Board of Revenue said that the government had decided to continue to provide protection to domestic industries in the new VAT law in the same manner the industries are getting under the existing law.
The products which enjoy significant local production and the import substitute items will face supplementary duty, they said.
Under the new Value-Added Tax and Supplementary Duty Act-2012, the number of products having SD at import stage is reduced to only 170 from the existing 1,362 products, which has sparked heavy criticisms from the local manufacturers.
The new VAT law is scheduled to come into force from July 1 this year.
Supplementary duty is imposed on mostly final goods to provide protection to domestic producers from uneven competition with imported finished goods and promote industrialisation in the country.
The duty is also imposed on luxury and health-hazardous items to discourage use of those products through making the products costlier.
Entrepreneurs have been opposing the government’s decision of withdrawal of the SD, arguing that the decision would harm industrialisation in the country through reduction of the level of protection for the domestic industries.
Locally produced products will not be able to survive competing with imported finished goods as the prices of imported goods will be cheaper due to the withdrawal of the SD, they said.
They said that the country’s ceramics, plastics, confectionary, fabrics, bicycle, toys, sanitary towels and napkins, imitation jewellery, tooth brush, toys, lamps and lighting fittings, glass, tube and many other sectors would face harsh competition with imported products.
An NBR estimate also found that the level of protection for the domestic industry would drop to 23.3 per cent from the existing 50.7 per cent due to the measures to be implemented under the new law.
The government will also lose Tk 2,500 crore in revenue because of the reduction in number of products which are subject to SD imposition.
In the fiscal year of 2014-15, the revenue board received Tk 17,000 crore in SD but the amount would drop to Tk 14,500 crore under the new VAT regime.
In this context, the government decided to refresh
the existing list of goods having SD in the new law to keep the level of protection for local industry intact.
Officials, however, said that most of the products to be included in the list were not regularly imported into the country.
But, the decision would hurt globally the image of the country related to trade liberalisation, they said.
Under the new law, the SD will be applicable only to selected luxury items like motor car and health-hazardous goods like tobacco and alcohol.
According to the decision of the World Customs Organisation, member states will gradually have to reduce the level of supplementary duty to facilitate trade.
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