The National Board of Revenue has decided to scrap the existing VAT exemption benefit on unprocessed tobacco amid massive decline in revenue collection from the tobacco sector, mainly from cigarettes.
The revenue board took the decision at a meeting held on October 10 to make up for the loss in revenue mobilisation from the sector.
Revenue collection from the tobacco sector by the Large Taxpayers’ Unit (value-added tax) of the revenue board dropped by Tk 850 crore or 32 per cent of last year’s collection in only two months (July‑August) of the current fiscal year 2019-2020, according to the NBR data.
Under the circumstances, the NBR held the meeting with representatives of tobacco companies and field level VAT commissioners to ensure proper revenue mobilisation from the sector.
Officials said that withdrawal of VAT exemption on unprocessed tobacco and imposition of VAT on the product would increase revenue collection from the sector.
Tobacco products should also not be provided any tax benefits as the products caused severe harm to public health, they said.
During the meeting, the NBR also decided to increase the number of drives and enhance monitoring against printing and use of fake band roll amid allegations against cigarette companies of using fake band roll to evade taxes.
It also decided not to retain a particular VAT official to supervise revenue collection from tobacco companies for a long period of time to avoid any undue collusion between the official and tobacco company.
It also instructed the VAT offices to ensure 24-hour supervision of revenue collection from tobacco companies.
The NBR also moved to take steps to enhance transparency in account maintenance of tobacco companies to prevent evasion of VAT, supplementary duty and other taxes.
At the meeting, the representative of British American Tobacco Bangladesh Company requested the revenue board to in turn appeal to the health ministry so that opinions were taken from cigarette manufacturers before finalising the National Tobacco Control Policy-2019.
Following the suggestion, the NBR has decided to take the request to the ministry before finalising the policy although the Framework Convention for Tobacco Control of the World Health Organisation prohibits taking of opinions of tobacco companies for framing such policies.
NBR chairman Md Mosharraf Hossain Bhuiyan presided over the meeting.