Keep local components VAT-free till 2027: motorcycle makers

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Motorcycle manufacturers have urged the federal government to keep exempting VAT on sales of locally-made parts until 2027 to keep prices low as the purchasing power of people has seen a sharp fall due to Covid-19 pandemic.

The exemption provided by the Motorcycle Industry Development Policy 2018 is defined to expire in the outgoing fiscal year. At least 30 % of the components used in building motorcycles will be manufactured locally. 

"In the proposed cover fiscal 2020-21 the federal government did not incorporate the VAT exemption," said Hafizur Rahman Khan, president of the Bangladesh Motorcycle Companies and Exporters Association and chairman of Runner Group.

"If the government will not provide the exemption of VAT, the quickly growing motorcycle industry will not be able to survive seeing as the sector has been severely affected as a result of pandemic of Covid-19," he said.

"I with respect to the association wrote a letter to Bangladesh Trade and Tariff Commission to safeguard our local sector," Khan said in a statement.

Native motorcycle manufacturers have been able to bring prices straight down and have even started exporting to overseas markets, said the association.

Without the VAT exemption, they will not manage to survive in the domestic industry competing with imported motorcycles, it said.

The 2018 policy was formulated by the federal government to attract foreign investment in this sector.

The aim was to boost the sector's contribution to the gross domestic product from the present 0.5 % to 2.5 % by 2027 and develop the industry's capacity, now dominated by the assembling of imported components.

The federal government set a target to permit the local suppliers to create around 5 lakh motorcycles annually by 2021 and 10 lakh by 2027.

After that, the policy as well set a focus on to increase the employment opportunity supplied by the sector to 15 lakh from existing 5 lakh.

This light engineering sector using its way to obtain original spare parts is an extremely important enabler for the neighborhood motorcycle industry, said Khan.

Once the policy was formulated, Honda, Bajaj, Yamaha, Hero and TVS started making motorcycles in Bangladesh, combining foreign and hometown investors.

Local manufacturers just like Runner, Brand-new Grameen and Roadmaster are also wanting to boost their technology and going for exports to Nepal, Bhutan and various other countries.

According to Khan, investment in the sector at the moment stands at about Tk 8,000 crore.  

The policy support from the government helped to significantly scale back import of motorcycle components, saving forex and enriching domestic reserves, he said.

However the industry is beneath the threat of monetary activities being almost paralysed because of the pandemic of Covid-19. 

It faced income losses of some Tk 1,200 crore as a result of prolonged shutdowns, resulting in uncertainties, including apprehensions and panic among employees above losing their jobs, said the association.

From this backdrop, the industry needs plan support from the federal government to safeguard itself alongside foreign investment, it said.
Source: https://www.thedailystar.net

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