The government may increase the rate of advance trade VAT on import of goods to five per cent from the existing four per cent in the national budget for the next fiscal year 2018-2019.
Finance minister Abul Maal Abdul Muhith may announce the upward revision of the import stage advance trade VAT in his budget speech to be delivered on June 7 in parliament.
He also may announce merger of existing rates of value-added tax to bring down the number of rates to six from existing 10 rates, finance ministry officials said.
They said that the decisions, if finally adopted, would help the National Board of Revenue in increasing revenue collection in the next fiscal year.
They also said that import of thousands of products, however, would become a little bit costlier due to increase in ATV.
Currently, 15 per cent value-added tax is also applicable on import of most of the products.
Importers, however, can take rebate on the ATV paid during their business process including, production and trading.
NBR imposes ATV on import of most of the products, except those which enjoy VAT exemption at trading stage and other VAT exempted product.
ATV is basically business stage VAT. NBR collects 15 per cent VAT estimating 26.6 per cent value addition on business stage.
Officials said that NBR imposed the ATV at import stage as it found it difficult to realise the VAT at business stage. Traders usually do not maintain standard accounting system while NBR also does not have proper logistics, manpower and expertise to detect the VAT.
So, NBR collects four per cent VAT on the total value of products or 15 per cent on 26.6 per cent value addition at import stage.
Officials said that NBR conducted an analysis on merger of existing VAT rates into two rates following an instruction of Muhith.
NBR found it difficult to scrap the existing multiple VAT rates, ranging from 1.5 per cent to 15 per cent, as it would hurt many of businesses, particularly small and medium enterprises, and increase VAT burden on consumers suddenly.
Traders may also express agitation against such sudden change in VAT rates which may create an awkward situation for the government.
Some local businesses still need protection in terms of reduced VAT rate.
Considering the impact, NBR also favoured reducing the number of VAT rates to six rates.
Officials said that the existing VAT rates between 1.5 per cent and 10 per cent would be merged with each other while the rates above 10 per cent would remain unchanged.
Earlier in April, Muhith instructed NBR for exploring the possibility to merge the VAT rates into two rates in the upcoming budget keeping implementation of new VAT law from July 2019.
The government is mulling introduction of two VAT rates instead of uniform 15 per cent under the law.
The existing VAT rates are 1.5 per cent, 2.5 per cent, 3 per cent, 4 per cent, 4.5 per cent, 5 per cent, 6 per cent, 7.5 per cent, 10 per cent and 15 per cent.
Officials said that there might be some other changes in measures related to VAT in the budget.
Tobacco products may witness significant rise in taxes including supplementary duty in the budget.
NBR may also withdraw tariff value benefit for some products and may impose VAT at regular rates.
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