The government may gradually scrap the existing tariff value system of value-added tax calculation for goods at production stage as the artificial value set by the National Board of Revenue for the purpose is not consistent with the market prices of the products, said officials.
The NBR has already started working on the issue as per instruction of finance minister Abul Maal Abdul Muhith.
The revenue board currently sets the tariff values of different types of products at lower rates than the market prices to reduce the burden of VAT as most of the products are consumer items.
Currently, there are around 100 types of products like biscuit, cake, packaged spices, pickle, sauce, fruit juice, newsprint, paper, bricks, glasses, MS rod, transformer, CR coil and GP sheet to which tariff value is applicable at production stage.
The NBR also sets tariff value of four products — crude edible oil, GP Sheet, CI sheet and MS products — for imposing VAT on trading stage.
Under the scheme, VAT at the rate of 15 per cent is imposed on the tariff value instead of actual market price resulting lower VAT incidence on consumers.
Officials said that finance minister recently instructed NBR chairman Md Mosharraf Hossain Bhuiyan for preparing a list of products containing tariff value and actual market prices of those products.
He also asked the NBR to devise a strategy along with a schedule to phase out the tariff value system.
‘Tariff value is applicable for different types of products. This value will have to be scrapped within a specific period of time,’ Muhith wrote in a note on the upcoming budget for the fiscal year 2018-2019.
‘So, I need a list of products having the rate of tariff value and the market prices of those items,’ he said, adding that a timeframe on scrapping the system was also needed.
Officials said that VAT wing of the NBR had already prepared the list with an analysis and sent to the finance minister for his consideration.
The NBR set the tariff value at least five to six years ago in line with the then market prices of the products, they said.
‘Market prices of those items have increased significantly over the years and the rate of general inflation also went up,’ said a senior official of the tax office.
The NBR did not modify the tariff in line with the market prices as well as inflation, he said.
For example, the tariff value of mechanically made biscuit has been set at Tk 85 to Tk 100 a kilogram but the items are sold much higher prices at the market.
Similarly, the tariff value of packaged spices like pepper, coriander and turmeric was set only at Tk 40 a kg and juice at Tk 20 a litre.
Officials said that finance minister was yet to finalise the issue of possible VAT rate on the products in case of withdrawal of tariff value.
The government may need to set VAT at lower rate to contain the price hike of the products, they said.
Burden of VAT will increase if 15 per cent VAT is imposed on market prices of the products, they added.
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