The government may reduce the rate of monthly interest on delayed payments of value-added tax in the national budget for the forthcoming fiscal year to lessen the burden of penalty tax on businesses.
Officials of the finance ministry said that the interest of delayed payments of VAT might be lowered to 1 per cent from existing 2 per cent in the budget to be placed before parliament on June 3.
The government may also reduce the advance tax on import of raw materials for the manufacturing units that usually import a huge volume of raw materials to 3 per cent from current 4 per cent to help the businesses sustain amid the Covid outbreak, they said.
It may not increase any taxes in the 2021-22 fiscal year as businesses are suffering from sluggish economic activities caused by lockdown and movement restrictions imposed to control the spread of coronavirus pandemic, they said.
The National Board of Revenue introduced the monthly interest at the rate of 2 per cent as penal tax with the inception of VAT Act-1991 and the rate was also incorporated in the new VAT and Supplementary Duty Act-2012.
The interest becomes applicable if any VAT-registered person or VAT deducting entity fails to pay or deposit the VAT in the government exchequer within the specific date.
Businesses have long been demanding reduction in the rate as the amount of interest in many cases surpassed the actual payable VAT if the VAT officials claim the VAT after several years.
They are also demanding withdrawal of AT on import as a huge amount of their working capital has remained stuck with the VAT offices due to slow process of refund.
Manufacturers should be waived from payment of AT, which is refundable, as it is easy for the revenue board to track the manufacturers, they said.
Field-level VAT offices also found that the actual payable VAT became negative for some large manufacturing sectors after adjustment of AT.
Large manufacturing units such as cement, ceramic and beverage may be benefited from the reduction in AT as the sectors import a huge volume of raw materials for producing finished goods.
A reduction in AT for the sectors will also minimise the problems related to refund, officials said.
The NBR in the fiscal year 2019-2020 imposed 5 per cent AT on import of all types of products.
Later in FY 2020-2021, the rate of AT was reduced to 4 per cent for manufacturers while the tax was also waived for some sectors.
Officials of the revenue board said that they might not bring any other major changes in the VAT measures in the budget.
The issues were also finalised at a meeting with prime minister Sheikh Hasina on May 12, they said.
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