Income Tax, Value Added Tax and Import-Export Duty10 June 2022
Direct Tax: Income Tax Madam Speaker
239. Direct Tax or Income Tax is the internal driving force of a country's economy and plays a pivotal role in maintaining social and economic equality in the country. At present, the share of income tax to the total tax revenue collected by the National Board of Revenue (NBR) stands at around 35 percent. Despite the outbreak of COVID- 19 pandemic, income tax recorded an average growth rate of 16 percent or above in recent years, and this growth is continuously maintaining an upward trend. Considering 2013 as the base year, the growth recorded in tax base is 574 percent which is expected to improve even further through the policy initiatives proposed in this budget. Analysis of the context, facts and figures of different countries of the world reveals the growing tendency of multi-faceted financial and social inequality among the citizens as an outcome of economic growth in a society or a country. The main objectives of income tax are to ensure reduction in income inequality and establish social justice by providing adequate revenue for the overall development of the country, ensuring macro-economic stability, bringing discipline in public financial management through redistribution of wealth with a view to establishing a welfare state. Formulating a welfare-oriented and people-friendly income tax law is one of the important tools in achieving these objectives. Bangladesh has become a role model to the world, which is badly battered by COVID-19, for her success in addressing the damage to the economy caused by the pandemic and in promoting social and economic development. In the proposed budget, policy initiatives have been undertaken with a view to mitigating the damage to the economy caused by the post COVID-19 global unrest, as well as adopting business and investment friendly tax policy, ensuring proper enforcement of tax law, dissipating social and economic inequality and promoting ICT-friendly policy.
240. Since taking charge in 2009, the present government has constantly been pursuing a taxpayer, business and investment friendly policy in collecting taxes to establish a strong tax culture in the country. The essence of this policy is to gradually ease the tax burden by increasing investment and tax-to-GDP ratio in the economy, and also by motivating the taxpayers for better tax-compliance. You are well aware that the tax-free income ceiling for individual taxpayers, which was Tk. 1 lakh 65 thousand in FY2009-2010, has been increased from time to time to bring it to the tune of Tk. 3 lakhs in FY2020-2021. This ceiling has been kept unchanged in the following fiscal year. The tax-exempt income ceiling is even higher for females, senior citizens, physically challenged people, members of the third gender, and freedom fighters, who were wounded in the war. The tax rate of non-listed companies in the stock market has gradually been brought down to 30 percent in FY2021-2022 from 37.5 percent in FY2009-2010. This issue has also been considered in the proposed budget for FY2022-2023, deliberations on which shall be covered in the later part of my speech. Also, in light of this policy, the tax rates of companies listed in the stock market and banks, insurance companies and financial institutions have been gradually reduced from 27.5 percent to 22.5 percent and 42.5 percent to 37.5 percent respectively between FY2009-2010 till date. Adoption of this apt policy by the government not only acted as a great incentive for the taxpayers to be compliant but also positively influenced investment and employment generation to increase in the country.
241. At this point I am presenting before this august House some important proposals relating to income tax for the FY2022-2023.
242. The present ratio of private investment to GDP in Bangladesh stands at 23 percent. The government has taken different initiatives to increase this ratio with a view to developing to the status of a developed country. The desired target for private investment to GDP ratio can be achieved by reducing corporate tax rate. A tax rate commensurate with the ongoing business-friendly policies of the government will play a vital role in expanding trade and commerce as well as establishing a pro-tax culture. Predominance of cash transactions in the economy is a great hindrance for collecting revenue. Curbing the multitude of cash transaction through the effective use of ICT and adopting necessary legal steps to this effect will result in increase of revenue collection and at the same time open up a new horizon towards establishing a Bangladesh based on social justice, equality and welfare. Considering all these, and with a view to facilitating rapid expansion of trade and commerce, the corporate tax rate has been reduced from 32.5 percent to 30 percent through Finance Act 2021. In FY2022-2023, I would like to propose a further reduction of the existing corporate tax rates. In this case, all receipts and income must be transacted through bank transfer and all expense and investment over Tk. 12 lakhs must be made through bank transfer. Here, I propose to reduce the tax rate for non-listed company from 30 percent to 27.5 percent. Also, to facilitate formalization of the economy and to incentivize formation of One Person Company (OPC), I propose to reduce the tax rate for OPCs from 25 percent to
22.5 percent. For the sake of development of the stock market and attracting investments, I propose a tax rate of 20 percent in place of existing 22.5 percent for listed companies that issue shares worth more than 10 percent of its paid up capital through Initial Public Offering (IPO). I, however, propose the tax rate to be 22.5 percent for a listed company that issues shares worth ten percent or less than ten percent of its paid up capital through IPO. But in this case, the tax rate would be 25 percent instead of 22.5 percent if the company fails to comply with the conditions mentioned earlier.
I propose the following corporate tax rate for FY2022-2023 applicable for taxpayers other than individuals.
types of supply causes excessive effective tax burden for business people in certain cases. With a view to mitigating this issue, I propose to reduce the rate of tax at source on supply of trading goods from 7 percent to 5 percent, and on supply of books, except government supply, from 7 percent to 3 percent. In order to reduce the cost of production in industries, I propose to cut the rate of tax at source on supply of raw materials to manufacturers from 7 percent to 4 percent.
245. One of the objectives of tax policy of the present government is to expand the tax net on one hand and gradually rationalize the tax rate on the other. As part of this policy, I propose to reduce the rate of tax at source from 12 percent to 10 percent on certain services rendered by a resident taxpayer. In addition, I propose 5 percent tax at source on gross bill of terminal operation/ ship handling, as part of port operations, similar to that on stevedoring/ berth operation commission.
246. Economic integration, formalization of the economy and ease of tax compliance are of utmost importance to national economy. To this end, I make the following proposals:
a. To fix the rate of investment tax rebate at 15 percent on eligible amount;
b. To keep service charge of mobile financial services out of tax deduction at source;
c. To introduce the provision of amortization of pre- commencement expenditure of business as this cannot be claimed as allowable expense under the existing law;
d. To define 'Research and Development' and to make it an allowable expense as no clear provision to allow this expense exists in the prevailing law;
e. To raise the present allowable ceiling of perquisite from Tk. 5,50,000 to Tk. 10,00,000;
f. To make provision of disallowance of the contribution made to Workers' Profit Participation Fund (WPPF) by a company as an expense. As per Bangladesh Labor Act 2006, provision is there to make contribution to the WPPF, and this is payable from the after tax-profit of a company;
g. To consider the special reserve of financial institutions as non- admissible expenditure in light of the existence of clear provisions in the tax law regarding set-off and carry forward of loss.
h. To include hotels, resorts, community centres and transport agencies as tax deducting/collecting authorities with a view to expanding the tax net;
i. To fix a uniform tax rate for income derived from poultry, hatchery and fishery.
247. The present government is relentlessly working to integrate the marginal and the underprivileged population of the country into mainstream economy. The physically challenged people and people of third gender constitute a large part of the marginal and underprivileged section of the society. Compared to others, these people are lagging behind in socio-economic standards, and are also left outside the mainstream of society. Social inclusion of this population can be ensured by engaging them in productive employment. Against this backdrop, with a view to providing employment and giving better living standards and ensuring social and economic inclusion of the physically challenged and people of third gender, I propose in this august House to further expand the existing tax incentives provided to them. Under the present provisions, an employer is allowed 5 percent rebate on payable tax if at least 10 percent of the total workforce is recruited from physically challenged population. Also, tax rebate to the tune of 75 percent of the total salary paid to the workers from the people of third gender or 5 percent of the tax payable, whichever is less, is allowed to an employer employing 10 percent or more than 100 persons of the total workforce from the people of third gender. I propose to amend both the existing provisions to make it such that if any employer employs 10 percent or more than 25 persons from the physically challenged or the third gender community, the employer will be entitled to get 75 percent of the salary paid to these people or 5 percent of the tax payable, whichever is less, as tax rebate.
248. This is the age of information and communication technology (ICT). The present government is putting special emphasis on the ICT sector. With a view to facilitating the endeavor of the government to build a digital Bangladesh in all its dimensions, start-up initiatives should be supported by providing special incentives. I propose to exempt the start-up businesses from the bindings of all other types of reporting except submitting income tax return, and to allow start-up companies to set off and carry forward losses over a period of nine years. Also, to allow the start-up entrepreneurs competitive advantage to expand their business in the global arena, I propose to withdraw the restrictions on expenditure and fix the rate of turn over tax at 0.1 percent in place of 0.6 percent.
249. The outbreak of Corona virus and the ongoing unstable condition in certain parts of the world forebode a recession in the global economy. Under the circumstances, we might have to face tough challenges in the coming fiscal year. As such, we have to be more prudent and visionary in adopting and implementing fiscal policy. To keep the economy going, we have to arrange for more revenue for the government expenses on one hand, and also have to make the economic activities in the private sector more vibrant and dynamic on the other. I, therefore, propose to add a new provision in the Income Tax Ordinance, 1984 so that money earned and asset acquired abroad can be mainstreamed into our economy with a view to creating a flow of fresh fund and investment for economic activities. According to the proposed provision, no authority, including the income tax authority, shall raise any question as to the source of any asset located abroad if a taxpayer pays tax on such asset. The proposed rate is 15 percent for immovable property not repatriated to Bangladesh, 10 percent for movable property not repatriated to Bangladesh and 7 percent for cash and cash equivalents repatriated to Bangladesh. This opportunity will be in force for the period starting from the first day of July 2022 and ending on the thirtieth day of June 2023. The proposed provision, when implemented, will increase the flow of foreign currency to our economy, increase income tax revenue, and the taxpayers will also feel relieved by availing this opportunity to declare their assets and money acquired/earned abroad in their respective income tax returns.
250. Galvanized iron sheet or steel products are one of the major raw materials used in construction of physical infrastructure and also used in the Ashrayan Project of the government. Providing tax benefit to the industries engaged in manufacturing such products will make construction of physical infrastructure and implementation of the Ashrayan Project more cost-effective and easier. In this context, I propose to reduce the rate of tax from 5 percent to 3 percent on import of HR coil and zinc, raw materials used for manufacturing galvanized iron sheet or steel products.
251. The Gold Policy-2018, which came into force on October 29, 2018, was made with a view to increasing government revenue by bringing the gold sector of the country within a regulatory framework. This has created some private entrepreneurs, who are interested to import gold through the proper channel adhering to government rules and regulations. I propose to withdraw advance tax on import of gold with a view to encouraging import of gold through formal channel and discouraging gold smuggling in the country. This will hopefully lead to much growth of the jewelry industry in the country and increase tax revenue collection.
252. Globally Bangladesh has retained second position in export of RMG. The tax policy of the government provided support in making this industry competitive internationally. In order to retain this achievement and to get expected revenue from this sector, the incentives granted to the textile sector need to continue. The prevailing tax rate for the textile sector stands at 15 percent, and the SRO to this effect expires on June 30, 2022. I propose to extend this facility until June 30, 2025. I believe the valued taxpayers will take advantage of this long-term preferential tax benefit and will feel encouraged to pay their due taxes.
253. It is expected that bringing discipline in the public financial management by reforming revenue policy and rationalizing the tax rate for the private sector will reaffirm our advancement in different economic indicators. At present bad debt that is writing off by a bank or financial institution is tax exempt for all taxpayers. I propose that bad debt that is written off for all types of taxpayers, except for individuals, is considered taxable income for the concerned loan defaulter. Also, as per existing provision, the capital gain earned from government securities is kept out of the purview of taxation. In line with other securities, I propose to make such capital gain taxable. In pursuit of rationalizing the prevailing tax rate for the private sector, I propose to consider the tax collected from import of beverage concentrate, export of services, operation of inland ships and commercial vehicles as minimum tax.
254. Compared to other developing and developed countries, the tax-GDP ratio of Bangladesh is not that encouraging. It is essential to raise our tax-GDP ratio significantly in order to support our graduation to a developed country. We need to expand the tax net by bringing all eligible citizens of the country within the tax net, which in turn will enhance our capacity to tap more revenue and expand the size of the formal economy. I propose the following legal provisions for submitting income tax returns with a view to expanding the existing tax net:
a) To mandatorily present proof of submission of return (PSR) in certain cases;
b) To submit income tax return of all funds except recognized provident fund, approved gratuity fund, pension fund, approved superannuation fund and workers' profit participation fund;
c) To make submission of income tax return mandatory for schools under Monthly Payment Order (MPO) that have introduced English version in their school;
d) To expand the provision of spot assessment at all levels beyond the growth centres;
e) To introduce the provision of realizing undisputed arrear tax demand from the directors of a company if the operation of such company remains suspended for three consecutive years or more;
f) To introduce provision of disconnecting utility service connections, such as gas, electricity, water etc., in case of failure to pay the undisputed revenue demand of the government.
255. One of the major challenges in tapping revenue in this era of globalized economic activities is to collect proper taxes from non- resident taxpayers and digital service providers, and to make them follow the rules and regulations strictly. With a view to collecting expected revenue from non-residents in Bangladesh, I propose to withdraw the provision of exemption from submission of income tax return for those not having any permanent establishment in Bangladesh. I also propose that NBR formulate proper rules defining the scope and areas of income and exemption of non-residents to ensure proper collection of revenue from them. Also, I propose to make presenting proof of submission of return a mandatory provision in cases where income arises to a person from Bangladesh through digital presence.
256. Deduction at source is regarded as the foundation of income tax collection. The same is true for our country too. Therefore, rationalizing the rate of source tax carries immense importance in formulating revenue policy. In view of this, and in line with the existing corporate tax rate, I propose to raise the rate of source tax on bank interest for company taxpayers to 20 percent from that of 10 percent, and to raise the rate of source tax on export proceeds to 1 percent from that of 0.5 percent. Also, to support materializing our dream of building a digital Bangladesh, I propose to reduce the rate of source tax on the payments made to non-residents on account of bandwidth payment to 10 percent from 20 percent. With a view to discouraging making payments of bills to non-residents through illegal channels, except for certain services, I propose to reduce the rate of collecting source tax from the other non-scheduled payments to be paid to non-residents from 30 percent to 20 percent. Also, to expand the scope for collecting source tax, I propose to impose 5 percent source tax on lease rent of water bodies except for the ones owned by the government.
257. Export is the main source of foreign currency for the country. Export business plays a vital role in achieving economic prosperity. In order to increase the contributions of the export sector to our GDP, long-term tax incentive have been granted to goods 'Made in Bangladesh' and services in the last fiscal year. As a continuation of that effort, initiatives should be taken to create new export sectors, to diversify goods and to search for new export markets so that 'Made in Bangladesh' can be made a global brand. Also, service export should be given due priority alongside goods export. As a part of this initiative, I propose to include export of services in the definition of export in tax statute. I also propose to exempt the income earned in foreign exchange by ocean going vessels carrying Bangladeshi flag from paying tax until 2030 provided the income is brought to Bangladesh through banking channel. By adopting these proposals, we will be able to establish service export as a potential export industry for earning foreign currency for the country. The prevailing tax rate for the export oriented RMG sector stands at 12 percent for general factories and 10 percent for green factories. With a view to encouraging diversification of export goods and ensuring a level playing field for all other sectors exporting goods and services, I propose to introduce 12 percent tax rate for all other general industries exporting goods and services and 10 percent for all other green industries exporting goods and services. This sort of export-friendly initiative will bring down trade deficit with other countries. As a result, deficit in current account, a major economic indicator, will be minimized.
258. In her journey towards continued growth and development, Bangladesh has already achieved middle-income status. We are dreaming of becoming a developed country by 2041. In order to continue this development trend, adequate revenue collection, especially from direct taxes, is an essential prerequisite. Collecting adequate revenue from domestic sources to fund the development expenses has been set as a major SDG target. In this connection, with a view to establishing a modern, state of the art, ICT-backed and effective tax system based on international best practices, initiatives taken by the Government to reform, expand and reorganize the Income Tax Department are ongoing. We hope to complete the ongoing reform and expansion initiatives by FY2022-2023.
259. If the proposals placed in the budget are properly implemented, the economic activities in Bangladesh will get new momentum, foreign remittance inflow will increase with growth in the export sector, tax net and formal economy will expand, new entrepreneurs will emerge, employment opportunities will broaden, foreign investment will increase, and investment and business friendly environment will be ensured. As a result, tax base will be strengthened, which will ultimately take Bangladesh a big step closer towards achieving the Vision 2041.
Value Added Tax
260. The present government has undertaken various reform measures and changes in the national economy to improve the socio- economic condition of the country. As a part of the structural changes in the indirect tax system a new law titled
"The Value Added Tax and Supplementary Duty Act, 2012" has been enacted in the Parliament in 2012. After thorough and detailed discussion with the business community, the Act has been put into force from July 1, 2019 with the aim of introducing a modern, investment and revenue friendly value- added tax system. In continuation of previous years, various steps have been undertaken in this year's budget to mitigate the problems of taxpayers in implementing the new law. This year's budget has been prepared with the objective of meeting the revenue target as well as improving ease of doing business. Expanding the VAT net is one of the key strategies to increase the tax to GDP ratio. The proposed budget places special emphasis on this issue. During the last two years, the normal pace of business and industry has been disrupted by the pandemic. Many small businesses have suffered badly. That is why in this year's budget, special attention has been given not to increase the VAT burden on such businesses and that their working capital flows remain steady. I place the following proposals for the kind consideration of this august House with the objective of promoting economic growth and safeguarding the interests of both industries and consumers. In the process, we hope to increase revenue collection, raise the tax-to-GDP ratio, continue supporting local industries, make Bangladesh an attractive destination to foreign investors and nurture a tax compliance culture.
261. I am presenting the following proposals on the Value Added Tax and Supplementary Duty Act, 2012 and the Value Added Tax and Supplementary Duty Rules, 2016, to mitigate the practical and procedural complexities, to facilitate business and to increase revenue collection:
a) I propose to amend definition of "input", "centrally registered entity" in the Act and to include definition of "contract manufacturer" in the rules;
b) I propose for necessary amendments in the relevant section to bring the branch office or liaison office of foreign organizations located in Bangladesh under VAT registration;
c) As per the existing provision of the Act, there is obligation for a business entity to have more than one manufacturing unit for central registration. Considering the business realities, I propose to introduce a provision that a business entity may get central registration even if it has one or more manufacturing units, instead of two or more, subject to the condition that accounting of that business entity is kept in computerized, automated system;
d) In case of supply of prepaid telecommunication services, I propose to amend the concerned section to allow decreasing adjustment of supplementary duty similar to VAT;
e) I propose to withdraw the obligation of transacting in the banking channel for availing rebate in case of supply made between two business entities having same ownership and to add new provisions to the effect that the rebate can be availed even if the transaction is done through mobile banking;
f) I propose to bring necessary amendments in the relevant section of the input tax credit so that business entities may get rebate more easily;
g) I propose to make necessary amendments in the relevant section of partial input tax credit to make it more comprehensible;
h) To reduce production cost, I propose to include a provision for direct delivery of imported raw materials from the port to the contract manufacturer by the owner of raw materials;
i) In case of VAT deduction at source, I propose to increase the time of decreasing adjustment from 2 tax periods to 4 tax periods;
j) I propose that the invoice issued by the Mobile Financial Service (MFS) provider to be considered as VAT invoice in case of payment of electricity bill; k) I propose to make necessary amendments in the relevant sections and rules of VAT deduction at source for the purpose of simplifying and making the provisions more consistent;
l) I propose to insert a new section in the law to refund VAT that is deposited mistakenly in the public treasury by an unregistered person;
m) In case of international tenders, I propose to make necessary amendments in the relevant rules in order to allow any kind of supply made against a contract, as is now accepted for L/Cs, to be treated as deemed export;
n) In case of late submission of return, I propose to make provision for obtaining permission within 7 (seven) days after the expiry of tax period instead of getting approval at least 7 (seven) days before the expiry of tax period;
o) I propose necessary amendments in the relevant section on tax determination in order to make it more understandable, clear and undisputed;
p) In case of supply of exempted goods and services, I propose to insert a provision to impose penalty instead of revoking the exemption facility when a violation of the conditions takes place.
q) I propose necessary amendments in some forms under the Value Added Tax Rules to reduce procedural complexity;
r) As per the guidelines of the World Customs Organization (WCO), I propose to amend the H.S. Codes of some goods of the First Schedule.
262. If the penalty imposed and interest charged is too high that creates practical complications and disrupts normal business activities in many cases. I, therefore, present the following proposals in order to make penalties and interests charged more tolerable for the business entities:
a) In case of failure or non-submission of VAT or turnover tax return within due date, I propose to reduce the amount of penalty from "10 thousand taka" to "5 thousand taka";
b) I propose to reduce the amount of penalty from "equal" to "minimum half and maximum equal" of the amount of tax evaded;
c) I propose to incorporate provisions of non-imposition of penalty in case of unintentional mistake of the taxpayers and non-submission of return for in between the periods a company ceases its operation temporarily and resumes its operation;
d) I propose to accept depositing only a portion of the tax claimed, not the fine and penalty imposed, for submitting an appeal to any Appellate Authority;
e) I propose to incorporate a provision to extend the period for another 60 (sixty) days if a business entity fails to file an appeal within 90 (ninety) days in the Appellate Tribunal;
f) I propose to fix the time limit for charging interest on arrears of VAT up to a maximum of 24 months.
263. To ensure proper supervision of value added tax collection activities and increase revenue collection, I propose the following amendments to the relevant sections and rules;
a) At present the scope of zero-rated VAT is much wider for international transport, which is causing practical problems at
the field level. So I propose to bring necessary amendments in this regard;
b) I propose to insert a provision in the law that VAT officials may request the concerned authorities to disconnect the electricity, gas and water connection of the VAT defaulting business entities;
c) I propose to bring the pending cases of the High Court under Alternative Dispute Resolution in order to make the Alternative Dispute Resolution (ADR) process more effective;
d) I propose to incorporate a provision to include "Cost and Management Accountants" alongside "Chartered Accountants" to assist in Alternative Dispute Resolution;
e) I propose to amend the law that no investigating agency can conduct any further investigation in the matter settled through Alternative Dispute Resolution (ADR);
f) At the time of audit, it becomes necessary to review the report of the Credit Rating Agency alongside the annual audit report. Therefore, I propose to incorporate a provision to include "Credit Rating Agency" in the relevant section to help VAT officers when necessary.
264. In order to increase revenue collection in the FY2022-2023, I present the following proposals:
a) I propose to impose 15 percent VAT on first class railway services in addition to air-conditioned services;
b) I propose to increase the amount of specific VAT by tk 200 per ton at manufacturing stage for different types of MS products;
c) I propose to withdraw the existing VAT exemption at the stage of production of Concrete Ready Mix;
d) I propose to withdraw the existing VAT exemption on 'Meditation Services';
e) I propose to withdraw the existing 5 percent VAT exemption at trading stage of mobile phone sets;
f) I propose to withdraw VAT exemption at manufacturing and trading stage of COVID-19 Test Kit, PPE, Protective Garments, Plastic Face Shields, Medical Protective Gear, Protective Spectacles, and Goggles for medical use and mask.
265. In order to attract domestic and foreign investment, create employment and keep the growth of domestic industrial development uninterrupted, I present the following proposals:
a) Extension of existing facility of paying 5 percent VAT to local manufacturer of LPG Cylinder for one year;
b) Withdrawing full exemption and imposition of 5 percent VAT at the local manufacturing stage on refrigerators and freezers and to continue existing exemption facilities on imported and local purchase of raw material and equipment till June 30, 2023;
c) Extension of existing VAT exemption facility for production of compressors of refrigerators and freezers till June 30, 2025;
d) Exemption of Advance Tax on imported raw materials of polypropylene staple fiber and keeping the existing exemption facility at the manufacturing stage;
e) In case of manufacture of Active Pharmaceuticals Ingredients (API), VAT exemption at local manufacturing stage and VAT (including Advance Tax) and Supplementary Duty exemption on import and local purchase of raw materials are proposed till December 31, 2025;
f) In order to develop heavy industry in the country, VAT exemption at local manufacturing stage and VAT (including Advance Tax) and Supplementary Duty exemption on import and local purchase of raw materials and parts to manufacture motor car and motor vehicle up to 2500 CC are proposed till
30 June, 2030. However, if conditions of complete manufacturer are not met, 5 percent VAT at the local manufacturing stage will be applicable from 2026;
g) 5 percent VAT will be applicable at the manufacturing stage of three-wheeler and VAT (including Advance Tax) and Supplementary Duty shall be exempted on import of raw materials and parts thereof till June 30, 2025;
h) VAT (excluding Advance Tax) and Supplementary Duty on import of raw materials and parts to manufacture maintenance free and sealed maintenance free battery, using idling stop / start-stop technology, shall be exempted till 30 June, 2025.
266. To make the business environment friendlier and to reduce tax- burden at the local manufacturing stage, I present some more proposals:
a) I propose to fix VAT at the trading stage for M.S. products at Tk. 200 per Metric Ton instead of Tk. 500 per Metric Ton;
b) I propose exemption of Advance Tax on importation of Terephthalic Acid and Ethylene Glycol, which are used as raw materials for manufacturing Textile Grade Pet Chips, by registered manufacturers; c) I propose to withdraw existing 5 percent supplementary duty on all types of polythene bags, plastic bags (including oven plastic bags) and wrapping materials made of polyethylene;
d) I propose to reduce the VAT rate (for some sectors) from 5 to
1.5 percent at the wholesale trading stage;
e) I propose to give VAT exemption at trading stage to those animal feeds which are already enjoying exemption at import and manufacturing stage;
f) I propose to reduce the existing VAT rate on manufacturing hand towels / paper towels / clinical bed sheets from 15 to 5 percent;
g) I propose 5 percent VAT on both AC and Non-AC restaurants (except restaurants in hotels with 3 or more star, and restaurants, where alcohol is served) instead of 10 percent VAT on AC restaurant and 5 percent VAT on non-AC restaurant;
h) I propose to give Advance Tax exemption on import of machinery and equipment by registered poultry farms;
i) I propose to exempt Advance Tax on import of Castor Oil Polyglycol 36-37, Solvesso 150 (APAC), Genapol 100, Propoconazole Technical 220 KG 22D, Dodecylbzols Acid Branched CA-S Sol, which are used to manufacture pesticides, fungicides used for agricultural purpose by the registered manufacturers;
j) I propose to give Advance Tax exemption to import of aircraft by registered organizations;
k) I propose to give VAT exemption on revenue sharing to BTRC against 4G mobile services provided by mobile operators;
l) I propose to allow VAT exemption on revenue sharing to BTRC against NTTN service;
m) In order to make readymade garment export more cost effective, I propose to give VAT exemption on supply of goods under sub-contract between the manufacturing units when both are enjoying bonded facility.
267. In order to reduce dependence on foreign products, save foreign currency and help develop domestic industries, I propose VAT exemption and reduction in the following areas:
a) VAT exemption at manufacturing stage to produce Textile Grade Pet Chips;
b) Exemption of VAT on first stage purchase of LPG in bulk, which will be sold in bulk later;
c) Reduce VAT on yarn made from man-made fiber and other fibers from Tk. 6 (six) per kg to Tk. 3 (three) per kg;
d) VAT exemption at the trading stage for sugar and puffed rice;
e) VAT exemption at the trading stage for tubular metal needles and needles for suture;
f) VAT exemption at manufacturing stage for Autoclaved Aerated Concrete Block;
g) VAT exemption at manufacturing stage for mobile phone batteries, chargers and interactive displays for the development of information technology and computer industry;
h) VAT exemption at manufacturing and trading stage for Power Tiller;
i) VAT exemption on manufacturing and trading for poultry, dairy and fish feed products as described in Customs S.R.O. No. 128-Ain / 2020/79 / Customs, Date: 03 June, 2020;
j) VAT exemption on supply of locally procured scrap in the foundry industry;
k) VAT exemption on Braille printing materials for visually impaired people as a social welfare service.
268. Excise duty on bank accounts and air tickets are collected as per provisions of the Excises and Salt Act, 1944 (Act No. 1 of 1944). At present excise duty of Tk. 40,000 is collected on bank accounts where the balance, at any time of the year, was above tk. 5 (five) crore. I propose to increase excise duty to Tk. 50,000/- from Tk. 40,000/- for bank accounts, where balance at any time of the year is above Tk. 5 (five) crore.
269. In order to reduce the use of tobacco products and increase revenue, I present the following proposal on tobacco and tobacco products:
a) I propose to fix the price of lower slab 10-stick/pack cigarette at Tk. 40 and higher and supplementary duty at 57 percent. Apart from this, I propose to fix the price of medium slab 10- stick/pack cigarette at Tk. 65 and higher, high slab at Tk. 111 and higher, and premium slab at Tk. 142 and higher. The rate of supplementary duty for these three slabs is proposed to be 65 percent;
b) I propose to continue existing price of non-filtered 25- stick/pack bidi at Tk. 18, 12-stick/pack bidi at Tk. 9 and 8- stick/pack bidi at Tk. 6 and 30 percent supplementary duty for all. I also propose to continue existing price of filtered 20- stick/pack bidi at Tk. 19, 10-stick/pack bidi Tk. 10 and supplementary duty 40 percent for all;
c) I propose to continue existing price of 10 gm Jarda at Tk. 40 and 55 percent supplementary duty. I propose to continue existing price of 10 gm Gul at Tk. 20 and 55 percent supplementary duty.
270. The VAT Online Project has already been successfully completed for the implementation of the new Value Added Tax Act on the digital platform from FY2019-20. VAT registration and return filing can now be done online from any place. Already hundred percent VAT registrations have been done online and about 73 percent VAT returns have been submitted online. At present, arrangements have been made for online payment of VAT through E-payment and A-challan. This has increased transparency and accountability of all activities of respected VAT payers, VAT collectors and VAT officials. Apart from this, Electronic Fiscal Device (EFD) / Sales Data Controller (SDC) have been set up from FY2020-21 to increase revenue collection from various retail and wholesale businesses. About 4,595 EFD / SDC machines have already been installed in various sectors. A total of 10,000 EFD / SDC machines are planned to be installed in various business establishments by June 2023. Alongside current government initiative to install more EFDs/SDCs, procurement process is underway for hiring outsourced services to collect revenue through installation of EFD / SDC. Efforts are being made to increase the scope and coverage of VAT, which will consequently increase tax to GDP ratio. I firmly believe that steps, which are already undertaken, will lead to the desired success in VAT collection by 2026.
271. The budget for FY2022-2023 has been prepared with the twin motive of reinvigorating the economy, which has been hard hit by the global pandemic and recent uncertainties in international trade, and bringing dynamism in the economy and in revenue growth. Various steps have been taken to prepare for our LDC graduation, to create new employment, accelerate GDP growth, develop local industries, increase investment through protection and trade facilitation, pay special attention to export oriented and heavy industry development and continue 'Made in Bangladesh' slogan. Careful consideration has been given to the proposals received from various organizations, business associations and stakeholders to safeguard the interests of domestic industry, trade and consumers. I am now presenting the proposals regarding import duties and taxes in the budget of FY2022- 2023 to this august House.
272. The following factors have been considered in formulating the proposals regarding import duty, regulatory duty, supplementary duty and value added tax at the import stage:
n Recovery of the economy affected by the global pandemic caused by the Corona virus (COVID-19);
n Investment and employment generation and judicious use of foreign currency;
n Diversification of export-oriented factories and incentives for backward linkage industries;
n Development of health, agriculture, fisheries, livestock, electronics, ICT and heavy industries;
n Creation of better environment for Ease of doing business;
n Development of opportunities in Bangladesh for foreign investment; and
n Increasing internal revenue collection (value added tax and income tax) through rationalization of tariff structure for development and protection of local industries.
273. I propose to continue the existing 6 (six) slabs of Customs Duty rates (0%, 1%, 5%, 10%, 15% and 25%), 3% Regulatory duty on the products that have the highest import duty and 12 (twelve) slabs of supplementary duty rates (10%, 20%, 30%, 45%, 60%, 100%, 150%, 200%, 250%, 300%, 350% and 500%) in the next fiscal year. In addition, tariff rates on essential commodities, fertilizers, seeds, life- saving medicines and some other industrial raw materials are proposed to remain unchanged.
274. Considering the above objectives, I present to this august House the sector-wise details of the proposals with your kind permission:
A) Agriculture Madam Speaker
275. Agriculture is our priority sector. It has been proposed not to change the structure of the existing tariff rates on imports of major agricultural inputs, especially on fertilizer, seed, pesticide, essential food items and on imports of other daily necessities.
276. Creation of two new H.S. Codes for fortified and non-fortified Basmati rice, where total tax incidence will remain unchanged, has been proposed.
277. 'Wheat gluten' is used in food preparation of domestic poultry industry. At present there is 25% import duty on that product. It has been proposed to reduce the import duty on that product from 25 percent to 15 percent in order to reduce the cost of production in the livestock industry and ensure the supply of protein to the consumers at low price.
278. 'Sugarcane molasses' is a major ingredient for the production of cattle feed. I am proposing to reduce the import duty on these products from 15 percent to 10 percent to reduce the production cost of cattle feed.
279. In order to ensure sustainable development of the fisheries, poultry and dairy sector, it has been proposed to continue the zero tariff rates and other concessions given in the past for the import of food items and miscellaneous items of this sector. In addition, it has been proposed to expand the concession facility for 03 new materials (test kits for use in poultry, molasses feed grade and cane molasses feed grade) used in livestock sector.
280. It is proposed to expand the concessional facility by including two new agricultural machinery (combined Harvester-Threshers and other threshing machinery) in the existing SRO for that sector.
281. Butter and cheese are two similar products. Although there is 20 percent supplementary duty on butter, there is no supplementary duty on cheese. Therefore, it has been proposed to impose 20 percent supplementary duty on cheese at the import stage.
282. Cold storage freezers and chillers used in agriculture and food industry are subject to high import duty. As a result, the cost of preserving domestic agricultural products is high. I am proposing to provide concessional facilities for import of cold storage freezers used for agro-based food storage. At the same time, I am proposing to decrease the total tax incidence of cold storage chillers to 37 percent.
283. It is proposed to expand the existing concessional facilities for certain raw materials used in production of pesticides, which are used in agriculture.
284. Incentives for various sub-sectors of the agricultural sector have been highlighted (table-1 in annexure B).
B) Health sector Madam Speaker
285. To combat the outbreak of coronavirus (COVID-19), all duties and taxes applicable on the import of coronavirus testing kits, special types of masks and hand sanitizers, raw materials required for the production of masks and PPE, raw materials required for the preparation of RT-PCR kits for detection of coronavirus have been waived through a special notification. Under the visionary leadership and guidance of the Hon'ble Prime Minister, the corona situation in the country has improved a lot. Therefore, I am proposing to abolish the existing concessional facility at import stage offered on these products after June 30, 2022.
286. In order to consolidate the achievements of the health sector, it has been proposed to continue the existing concessional facilities for import of raw materials required for the production of medicines and medical supplies.
287. I am proposing to reduce the applicable duty on Air-Zinc Battery used in the special device for hearing impaired people.
288. It is proposed to abolish all existing tariffs on the importation of specialized wheelchairs for the physically challenged people. (table-2 in annexure B).
C) Industry sector Madam Speaker
289. The importance of the industrial sector is immense in creating employment and attracting domestic and foreign investment. In addition, proper preparation in the industrial sector is required for successfully facing the post-graduation challenges. In order to increase investment in the industrial sector, to maximize the productive capacity of the existing industry through proper protection and to adopt a multi-faceted expansion strategy of export-oriented industries, I propose the following sector-wise proposals to increase/ decrease duty taxes: (Annexure B, Table- 3)
1) Small and Medium Industries Madam Speaker
290. In order to protect small and medium enterprises, I am proposing to increase the applicable duty on the import of some finished products made by those industries.
291. In case of import of capital machinery by small and medium industries, it has been proposed to continue the facility to import at the rate of 1 percent, irrespective of commercial or industrial entity.
292. In order to protect the paper cup manufacturing industry, it has been proposed to increase the supplementary duty on the import of some finished products.
2) Export oriented industries Madam Speaker
293. In order to develop the cashew nut processing industry in the country and to create new export sector, it has been proposed to reduce the tariff on import of raw cashew nuts.
3) Miscellaneous steel industry Madam Speaker
294. In order to encourage the production of import substitute products in the Electrode Manufacturing and Wire Drawing Industry, I am proposing to reduce import duty on the import of Bars & Rods of alloy steel used as a raw material to 5 percent.
295. Since different types of wires are almost homogeneous, it is difficult during assessment to distinguish between them. Therefore, to bring parity, I am proposing to increase the existing import duty on the import of both the products from 5 percent to 10 percent.
296. There are 15 percent and 25 percent import duties on different types of pipes. As it is a homogeneous product, it is time consuming and difficult to ascertain the exact type of pipe at the time of assessment. Therefore, for the interest of revenue protection, it has been proposed to fix 25 percent import duty on such products.
297. Galvanized Iron (GI) fittings manufacturing industry has now developed in the country. Therefore, it has been proposed to impose 20 percent supplementary duty on imported GI fittings to ensure protection of domestic industry.
298. It has been proposed to impose 20 percent supplementary duty on Screws / Nuts / Bolts etc. for uniformity of total tax incidence for different types of threaded articles as well as protection of local industry.
299. At present some local industries are producing high-quality stainless-steel products. In order to encourage the establishment of local backward linkage heavy industry and to ensure market competitiveness of the product, I am proposing to reduce the existing import duty from 10 percent to 5 percent on Hot-Rolled Stainless- Steel sheet as raw material.
(To be continued)