Full implementation of the new VAT law with 15 per cent uniform rate of value added tax has been suspended for two years while the excise duty on bank deposits has been revised.
The changes were made on Wednesday when the parliament passed the Finance Bill-2017.
Announcing the changes, finance minister AMA Muhith said that his proposal of full implementation of the VAT and Supplementary Duty Law 2012 would remain suspended for the next two years.
Since the announcement of the budget for 2017-18 fiscal on June 1, the octogenarian finance minister faced unprecedented criticism in parliament and outside for proposing the full implementation of the VAT law and the increased excise duty on bank accounts.
Full implementation of the VAT law that has been pending for the past four years will not take effect in the tenure of the Awami League-led government expiring in January 2019.
Before his announcement, prime minister Sheikh Hasina urged the finance minister to suspend implementation of uniform 15 per cent VAT for ‘at least two more years’ because of unresponsive business communities.
Muhith, who has been announcing the national budget for the record ninth time in a row, however, said they would take measures to implement the VAT law as it was done in the past four years.
He also backtracked from his proposals of raising excise duty on deposits on request from the PM.
According to the new proposal, deposits up to Tk 1 lakh would be made free of excise duty. The depositors would pay Tk 150 in excise duty for deposits from Tk 1 lakh to Tk 5 lakh and Tk 500 for deposits from Tk 5 lakh to Tk 10 lakh.
Besides, Muhiuth settled excise duty of Tk 2,500 for deposits from Tk 10 lakh to Tk 1 crore, Tk 12,000 for deposits from Tk 1 crore to Tk 5 crore and Tk 25,000 for deposits exceeding Tk 5 crore.
The minister faced severe criticism after he proposed to increase excise duty to Tk 800 from the current rate
of Tk 500 on bank deposit between Tk 1 and Tk 10 lakh.
In his nearly one-hour speech, Muhith brushed aside the criticisms that the country had been gaining ‘jobless growth’ in the past several years in absence of lower than expected private investment and rise in unemployment.
He hoped that the private investment target of 31 per cent in the new fiscal year would be attained against the backdrop of ‘political stability’ and the proposed massive expenditure for the Annual Development Programme.
He defended budgetary allocation of Tk 2,000 crore for recapitalisation of the state-owned banks including scam-hit BASIC Bank for keeping their operations alive.
Not mentioning that BASIC Bank was already given bailout fund of Tk 3,390 crore in the last three fiscals after change in the previous board of directors, led by controversial chairman Sheikh Abdul Bacchu, Muhith said the classified loan for BASIC was decreased to 52 per cent from 67 per cent under the new management.
He noted that they were fortunate that none of the country’s banks had collapsed.
Muhith informed the parliament that he had already suspended VAT on computer and cell phone accessories and announced waive of VAT on local motorcycles manufacturers and withdrew import duty on motorcycle spare parts and waive of import duty on Microsoft products.
He also slashed supplementary duty on refrigerator assembling plants to 20 per cent from 30 per cent and suspended VAT on LPG plastic and iron container.
Muhith scrapped import duty on solar panel and retained one per cent income tax on source on the export of readymade garment exports, but imposed 12 per cent income tax on RMG units and 10 per cent income tax on green RMG factories.
The financial bill 2017 was finally passed amid applause from both treasury and opposition benches by voice vote.
The parliament is scheduled to pass appropriation bill today.
Muhith on June 1 proposed over Tk 4 lakh crore budget.
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