The National Board of Revenue has relaxed conditions for VAT exemption on import off ocean going vessels having capacity above 5000 deadweight tonnage (DWT) following pressure from the association of the sector.
NBR made the change within three months after it offered the benefit to boost the sector and raise the earnings from the sector.
VAT wing of the NBR on 19 june offered VAT waiver on import of up to 22-year old vessels, raising the age limits from 15 years.
NBR in March this year initially offered 15 per cent VAT waiver on import for 15 years old ships.
NBR relaxed the condition after Bangladesh Oceangoing Ship owners’ Association sought permission for import of 25 years old vessels demanding the condition is contradictory with the provision of the country’s existing Import Policy Order, which allows import of oceangoing ships up to 25 years old ships.
NBR officials said that operators demanded relaxation of condition on the pretext of high cost to purchase15 year old ships from abroad.
importers claimed that a vessel could provide return up to 40-50 years and they would not be able to tap tthe benefit to that extent if they are to buy vessels at higher prices.
so, nbr raised the maximum age of ships for the benefit, officials said.
NBR also tagged an additional condition of having a foreign currency account at banks in Bangladesh for availing the benefit.
It said that oceangoing vessel operators will have to submit certificates or Proceed Realization Certificates issued by banks to the local VAT office every year as proof of their foreign currency earnings.
NBR kept other conditions such as compulsory requirement for registering vessel in Bangladesh as national flag carriers and continuing operation for 5 years as national flag carrier.
the other conditions include hiring at least 70 percent of Bangladeshi nationals for the vessel.
The NBR said it would realise the VAT from importers for non-compliance with any one of the conditions.
Bangladesh had 85 oceangoing ships four to five years ago but the number of vessels has now dropped to 35.
Officials of the revenue board said that NBR limited the age of the ships to encourage the import of comparatively newer ones so that those could remain functional for longer period in international market as the average age of economic life of a ship has been declining.
The condition was also involved with revenue protection issue, they said.
Currently, ship breaking industry imports ships older than 25 years as scrap with payment of huge amount of taxes including Tk 1,500 per tonne as customs duty, Tk 800 as advance income tax and 4 per cent advance trade VAT.
So, VAT waiver on older ships might encourage importers to import older ships under the exemption facility and use those as scrap in shipyards after one or two years as it would save them from payment of huge amount of taxes applicable on import of scrap ships.
Officials said the condition was also not contradictory to the import policy order as the NBR did not prohibit import of 25 years old ships.
It only tagged the condition for availing tax benefit, they said, adding that anyone could import 25 years old vessels with payment of VAT.
BOSOA claimed that they earned on an average $ 150 million a year by carrying less than five per cent of total export-import goods worth above $ 77 billion in the fiscal year 2016-2017 though they could carry, as per international norms, up to 50 per cent of total trade volume.
The country spent minimum $7.7 billion as freight charge at the average 10 per cent rate for carrying goods in the year, it said
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