VAT Act to be amended

The government has decided to amend the VAT Act, two years after it was enacted, despite objections from businesses in Bangladesh.

Finance Minister AMA Muhith on Wednesday, however, rejected apex business body FBCCI’s demand to reinstate the old Act of 1991.

He also expressed surprise over the new Act not becoming acceptable to anyone even though it was formulated after taking opinions from businessmen by holding several rounds of discussions with them.

Muhith said, "The new Act will stay. There is no possibility to return to the 1991 Act. But necessary changes will be made after discussing the issues with business representatives."

The minister was speaking at a seminar on the VAT Act, 2012 at the Institute of Diploma Engineers at Dhaka's Kakrail.

He asked the chairman of National Board of Revenue (NBR) to form a committee comprising two NBR officials and two business representatives to make necessary recommendation to amend the Act.

"Their recommendations will be taken into consideration," Muhith said.

Then finance minister Saifur Rahman had promulgated and enforced the VAT Act in 1991, although many had opposed it at that time.

In 1991-92 fiscal year, Tk 17.35 billion was collected by way of VAT. But the collection has become nearly Tk 500 billion in the last 23 years.

For the current 2014-15 fiscal, the government has fixed a target of Tk 565 billion revenue from VAT.

The new VAT Act, passed on Nov 27, 2012, would be effective from July 1 next year.

Different trade bodies, including FBCCI, have been opposing the law right from its inception.

Commerce Minister Tofail Ahmed, who was present at the seminar, urged the finance minister to consider the proposals of the businessmen.

"New businesses will suffer losses due to this Act. It is necessary to amend the law which causes loss," he said.

NBR Chairman Md Ghulam Hussain presided over the seminar, which was also attended by Food Minister Qamrul Islam, the Prime Minister's Economic Affairs Advisor Mashiur Rahman, FBCCI President Kazi Akram Uddin Ahmed and former FBCCI president Annisul Huq, among others.

The International Monetary Fund (IMF) had been insisting on a revamp of the 23-year-old VAT Act, and made that a condition for a $1 billion loan.

“You’re raising so many questions because we formulated the Act with the help of IMF consultants. If we had done this with the help of our own consultants this wouldn’t have happened,” the commerce minister said.

FBCCI President Kazi Akram demanded that the 1991 law be restored.

“People have been used to this law for 23 years. It is impractical to introduce a completely new law,” he argued.

The new law exempts small businesses from paying VAT.

Businesses making a sale of Tk 2.4 million will not have to pay any VAT, while those with sales between Tk 2.4 and 8 million will pay at a 3 percent rate.