A bag of goodies from Finance Minister Muhith as parliament passes finance bill

The parliament has passed the finance bill for fiscal 2017-18 with some measures altered by Finance Minister AMA Muhith on the prime minister's advice.

Senior Correspondentbdnews24.com
Published : 28 June 2017, 05:02 PM
Updated : 29 June 2017, 09:36 AM

In the face of public anger, the government has abandoned its unpopular plan to set the uniform VAT at 15 percent. For the next two fiscal years, the government will follow multiple rates of value-added tax on goods and services. What remains to be seen is how the government will offset the loss of potential income from VAT.

Muhith also revised excise duty on bank accounts. For the new fiscal year starting Jul 1, Muhith announced Tk 150 duty on bank accounts with balance between Tk 100,000 and Tk 500,000, going back on his original proposal for Tk 800 in the budget. It means the Tk 500 existing rate of excise duty for the same slab will come to an end in the outgoing fiscal year.

The twin measures endorsed in parliament on Wednesday are expected to appease the critics of the government ahead of the next election less than two years away.

"Many of the proposals I received in the past few months on taxes and duties were raised during discussion in parliament. I have accepted most of these proposals following Prime Minister Sheikh Hasina's advice and instructions," Muhith said. 

The key tax measures are:

1. Muhith has exempted Quantum Foundation of value-added tax for the next two years, saying it provides social services.

2. No VAT on computer and cellular phone equipment manufactured in Bangladesh.

3. Muhith has announced a VAT waiver on a series of goods imported by Microsoft Bangladesh. Microsoft pays as much as 25 percent import duty on some goods and gets a waiver on some other imports.

4. Supplementary duty on local refrigerator makers or assemblers will go down to 20 percent from 30 percent.

5. Importers of composite LPG containers made of plastic and glass fibre are exempted from VAT. The proposal aims to encourage the use of LPG. VAT on steel cylinders remains in force to safeguard local manufacturers.

6. Muhith has backtracked on the decision to raise taxes in the progressive manufacturing sector to help makers of motorcycle parts. He also said he cut duty on imports of materials necessary for assembling motorcycles and cars after being informed by the Japanese Embassy and Nitol-Niloy Group that Honda and other companies will start manufacturing motorcycles and cars in Bangladesh soon.

7. The proposed duty on import of solar panels has been withdrawn.

8. The 1 percent tax at source for the garment sector remains. The income tax for 'green factories' will be 10 percent while others will have to pay 12 percent.