Advance tax on imports to raise cost of business
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The introduction of 5 percent advance tax (AT) on imports from next fiscal year will push up operational costs of businesses, particularly for domestic market-oriented industries, said entrepreneurs.
The AT, which was imposed under the new Value Added Tax (VAT) system, would be adjustable with the total VAT in their returns.
The levy comes so that firms keep records of their sales and purchases properly to adjust or seek refund of the advance tax that they would pay during bringing in goods from abroad, said officials of the National Board of Revenue.
This will facilitate the revenue authority to widen the VAT net as well as curb the scope of money laundering through trade mis-invoicing.
Businesses, particularly those who make goods to cater the domestic market, said the AT would add a big burden for the banking sector that is already suffering from liquidity crisis.
“We are not getting the working capital to meet the requirements for our existing business. If we are to pay 5 percent advance tax on imports, we will have to get the additional fund from banks,” said Manwar Hossain, chairman of the Bangladesh Steel Manufacturers’ Association.
“It would be very difficult for banks to provide the additional funds.”
“This will add to the liquidity crisis and make our lives difficult. And the indirect cost of businesses will increase,” Hossain said, adding that port charges would rise if businesses cannot release their containers on time.
The provision of AT should not apply to manufacturers. “It can be imposed on commercial importers,” Hossain said.
Industry operators said commercial importers had to pay advance trade VAT (ATV) under the VAT law 1991.
Manufacturers though were exempt from ATV. Now, under the new VAT law, both traders and manufacturers will have to pay the AT. The newly slapped advance tax would not be applicable for goods on which VAT is exempt at all stages -- import, production and trade.
Manufacturers were required to deposit advance VAT before the supply of any goods under the 1991 VAT law, NBR officials said.
Under the new law, they will not have to pay VAT in advance. They will have to pay VAT at the end of a month, particularly during the submission of VAT returns. “So, this will reduce the pressure on them. Besides, they would be able to adjust the AT with the VAT paid,” said an official of the NBR requesting anonymity.
Some businesses however said there are various commodities like edible oil where there is no import tariff. In such cases, business would not be able to adjust.
Officials said firms would also get refunds. Businesses, however, said it would increase hassles for them.
The cost of imports would increase, leading to spiral in prices, said Biswajit Saha, director of legal and regulatory affairs at City Group, a major commodity importer and processor.
The government is working towards business process simplification and at the same time, it is imposing AT on capital machinery and raw materials, said Sheikh F Fahim, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).
This contradicts the government moves to enhance the ease of doing business, he said.
“Since AT is rebatable, it is an unnecessary process that will increase the operational costs,” he said, adding that the FBCCI will shortly raise its issues with the relevant authorities.
Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association, said imposing AT is equivalent to discouraging entrepreneurs.
NBR officials, however, said export-oriented industries that enjoy the bonded warehouse benefit would not have to pay the AT.
However, Md Jashim Uddin, president of the Bangladesh Plastic Goods Manufacturers and Exporters Association, said not too many companies export.
“The local industry will suffer. It will be difficult for small and medium industries to bear additional costs,” he added.
Source: https://www.thedailystar.net
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