The government may offer tax holiday facility to home appliance makers for 10 years in the national budget for the forthcoming fiscal year 2021-2022 to attract investments and facilitate import-substitute local industry in the country.
It may also withdraw advance tax on import of a number of products, including mobile telephone set, computer parts, MS products, scrap and ship scrap, to facilitate the sectors in maintaining cash flow of working capital as well as remove complexities related to refund.
The condition of having no legal dispute with the National Board of Revenue for claiming VAT refund may also be withdrawn in the budget, finance ministry officials said.
Finance minister AHM Mustafa Kamal may announce the changes in the income tax and VAT laws in his budget proposals to be placed before parliament on June 3, they said.
According to the officials, industrial undertakings to manufacture a number of home appliances, including blender, rice cooker, microwave oven, electric oven, washing machine, induction cooker, electric sewing machine and other kitchen appliances, will enjoy tax exemption under the scheme.
Currently, home appliance producing industries set up between July 1, 2019 and June 30, 2024 are eligible to enjoy income tax exemption at gradually reduced rates up to 90 per cent for 10 years depending on the location of the factories.
Under the new scheme, manufacturers who will begin production from July 1, 2021 and ensure value addition between 20 per cent and 40 per cent depending on types of products will avail complete tax exemption for 10 years.
The benefit will remain applicable until June 30, 2030.
Regarding withdrawal of AT on import mobile sets, computer parts, MS products, scrap and ship scrap, officials said that currently AT is applicable at two different rates — 5 per cent and 4 per cent — to import of the products based on the nature of the importers.
A huge amount of refund is created due to imposition of AT on import of mobile phones and computer parts as there is no VAT on the products at the trading stage, they said.
On the other hand, there is specific VAT ranging from Tk 1,000 to Tk 2,000 applicable to manufacturers on MS products, scrap and ship scrap.
The government does not get any VAT through monthly VAT returns due to the imposition of 4 per cent advance tax at the import stage, rather it creates refund for the sectors.
The government may also reduce the AT on import of raw materials for the manufacturing units to 3 per cent from current 4 per cent to help the businesses sustain amid the Covid outbreak.
It may also reduce the rate of monthly interest on delayed payments of value-added tax to 1 per cent from existing 2 per cent in the budget.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Tax