New VAT law stokes up fear

Dhaka,  Thu,  24 August 2017
Published : 13 Jun 2017, 19:26:11
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New VAT law stokes up fear

The beginning of the new VAT law may not be auspicious. But given the important role that the VAT revenue is designed to play in bankrolling the budget for the next fiscal, the launch was expected to be flawless. Failure to go even nearer to the VAT revenue target would mean real problem as far as the execution of the budget is concerned
The new Value Added Tax (VAT) and Supplementary Duty (SD) Act, to be enforced from day one of the upcoming fiscal year (FY), 2017-18, has stirred up concern among both businesses and consumers. Notwithstanding the fact that VAT is passed on the consumers, businesses are worried that the new law would affect both their turnover and profit. The overall impact of the changes in the VAT and SD regime would only be known after their implementation. However, it would be unfair to say that the government was totally oblivious of the consumers' interest, for, it has exempted many essential items from 15 per cent uniform VAT rate. But beyond those items, consumers will have to count extra costs as the maximum retail price of all products will be inclusive of VAT. 

Consumers are particularly worried over, at least, two essential utilities---power and liquefied petroleum gas (LPG). Power subscribers have been paying VAT at a rate of 5.0 per cent since long. The rate now will be at 15 per cent. The National Board of Revenue (NBR) has requested the power division not to pass on the new VAT rate to the subscribers since it (power division) would get refund of the VAT on account of procurement of goods and services in relation to generation of power. But the issue is not yet clear as the power division has not responded to the NBR request. The power tariff has been raised on a number of occasions in recent years despite the fact that fuel-oil price declined substantially in the international market during the period. The imposition of VAT at the new rate would only heighten the financial sufferings of the power subscribers. 

The number of LPG consumers have increased manifold over the years since the government has stopped giving new gas connections to residential and commercial users. The LPG price has always been higher than that of piped gas. Even after the recent hike in piped gas tariff, LPG is still pricier. The imposition of 15 per cent VAT on it would only add to the consumers' woes. The LPG users would have to pay an excess amount ranging between Tk 54 and Tk 300, depending on the size of the cylinders.  

There is another side of the VAT story. A large section of  businesses are still vehemently opposing the new VAT and SD law. Some of them are not adequately prepared to meet the requirements of the law. The same observation does also apply in the case of many VAT officials. They are not accustomed to rigours of the new VAT law that, if enforced properly, would leave little scope to enter into underhand deals with businesses. Moreover, one important element of the new VAT measure is the use of electronic cash register (ECR) machines. The NBR was earlier expected to make available 10,000 machines to businesses, initially, at cost price, by now. But that is most unlikely to happen. The import of the machines might take some more time. 

So, the beginning of the new VAT law may not be that auspicious. But given the important role that the VAT revenue is designed to play in bankrolling the budget for the next fiscal, the launch was expected to be flawless. Failure to go even nearer to the VAT revenue target would mean real problem as far as the execution of the budget for the upcoming fiscal is concerned. In fact, the stakes involved in the new VAT law execution for the government are quite high, at least, in relation to reactions from businesses and consumers

 
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