Under pressure from the International Monetary Fund, or IMF, Bangladesh is imposing additional VAT and duties on a number of essential goods amid the ongoing high inflation and slowing economy, production and supply.
Among the list of products to see the tax hike are medicines, powdered milk, biscuits, juice, fruit, soap, sweets, mobile phone calls, internet use, food in hotels and restaurants, air tickets, cigarettes and tobacco.
The VAT office of the National Board of Revenue, or NBR, made the sudden decision in the middle of the fiscal year as part of the $4.7 billion loan agreement with the IMF to maintain forex reserves, says a press release issued by NBR on Wednesday.
It said initially, 15 percent VAT had been proposed on 43 types of goods and services. These goods and services currently have VAT rates of 5 percent and 7.5 percent, respectively.
The proposal to increase VAT was raised at the advisory council meeting held at the Chief Advisor's Office on the day and an official of the NBR's VAT confirmed that it has been approved in principle.
Air-conditioned restaurants currently pay 5 percent VAT on food bills, which will now increase to 15 percent under the proposal. The 7.5 percent VAT of ready-made garment outlets is proposed to be hiked to 15 percent.
The VAT on sweets and services in non-AC hotels will be increased from 7.5 percent to 15 percent.
The proposal also imposes a 15 percent VAT on biscuits, pickles, CR coils, mattresses, transformers, tissue paper and Bangladesh Road Transport Authority (BRTA) driving license cards at the production stage.
The government has also taken the initiative to impose turnover tax based on the annual turnover of business establishments.
Bdnews24.com adds: Currently, turnover tax is only paid when the annual turnover is between Tk 5 million to Tk 30 million. The proposal imposes turnover tax on businesses that have turnovers from Tk 3 million to Tk 5 million as well. If the annual turnover is more than Tk 5 million, the proposal says a 15 percent VAT will be imposed on the sales of all goods and services produced by the business.
The existing 20 percent supplementary duty on liquor bills has been proposed to be increased to 30 percent. At the import stage, the supplementary duty on fruit juice has been increased from 20 percent to 30 percent, on tobacco from 60 to 100 percent, and on betel nut from 30 to 45 percent.
In addition, it has been proposed to increase the supplementary duty on mobile phone talk time.
Excise duty may increase on air tickets. In this case, the excise duty on domestic flights may be increased from Tk 500 to Tk 700, and for foreign travel, the excise duty on travel to SAARC countries can be increased from Tk 500 to Tk 700.
For trips outside SAARC countries but within Asia, the existing Tk 2,000 can be increased to Tk 2,500, and for trips to Europe and America, the excise duty can be increased from Tk 3,000 to Tk 4,000.
To receive the fourth tranche of the IMF loan, the NBR has faced the difficult task of increasing the tax-GDP ratio by 0.6 percent in the current fiscal year.
During a meeting with the IMF delegation visiting Dhaka on Dec 4, the NBR sought an opportunity to relax the previous conditions and agreed to increase the tax-to-GDP ratio by 0.4 percent for the current fiscal year.
