No increase in metro rail fares, but VAT imposed

No decision yet on whether DMTCL will cover the 15% VAT or pass it onto passenger fares

File photo

Dhaka Mass Transit Company Limited, or DMTCL, the operator of the metro rail, has not increased the fare for passenger services despite a VAT imposed on its services.

The government’s special order granting VAT exemption on metro rail services expired on Sunday.

Despite the introduction of VAT on Monday, authorities have not increased fares. It means the metro rail authorities will have to pay a 15 percent VAT on tickets from the current fares.

Under the VAT and Supplementary Duty Act of 2012, metro rail authorities are obligated to remit VAT revenue to the national treasury by Aug 15.

The decision on whether to raise fares or offset operational expenses to cover VAT payments, or seek government assistance, rests with metro rail authorities.

They are still requesting the National Board of Revenue, or NBR, to stick to the VAT exemption and are asking for government support.

DMTCL Managing Director MAN Siddique has not yet confirmed whether passengers will incur additional costs, and if so, how they will pay the VAT.

He told bdnews24.com on Monday, "DMTCL will not bear the VAT burden. It will definitely have to be paid by the public."

Regarding potential fare increases in the future, he said, "Meetings have been called by the Road Transport and Highways Division. Once decisions are made on this matter, we will know."

Mohammad Hasmat Ali, NBR first secretary of VAT policy, told bdnews24.com that beginning Monday, the first day of the new fiscal year, a 15 percent VAT would be imposed on metro rail services and tickets as the exemption expired.

"Since no new directive has been issued by the NBR, VAT will be implemented on metro rail fares from tomorrow [Monday] as per the previous decision," he added.

FARE ADJUSTMENTS

During peak hours, there is a huge rush of passengers on the metro rail. Presently, fares range from Tk 20 as the minimum to Tk 100 as the maximum.

Concerns arise regarding the potential minimum fare if a 15 percent VAT is imposed.

According to the Value Added Tax and Supplementary Duty Act of 2012, VAT must be integrated into the fare structure.

If the DMTCL intends to add 15 percent to the fare structure, then the minimum fare will be Tk 23.529 and the maximum fare will be Tk 117.65.

Here are the fares with VAT included:

Current Fare (Tk)	Fare with VAT (Tk)
20	23.529
30	35.29
40	47.06
50	58.82
60	70.59
70	82.35
80	94.12
90	105.88
100	117.65

Those with MRT passes will have the VAT automatically deducted. However, passengers using single journey tickets may face challenges with managing the additional charges.

Passengers need to purchase single journey tickets either at the counter or from ticket vending machines.

If they insert more money than the ticket price into the machine, they receive the excess amount back as a refund. However, no notes under Tk 10 have been dispensed from these machines so far.

If VAT is added, passengers purchasing single journey tickets may face inconvenience due to a shortage of change. Calculating how this money will be added also presents complexities.

According to the law, if money is converted to round figures with more vlues than the original, VAT must be paid on that additional cost.

If the round figure is smaller than the original, DMTCL's earnings will decrease based on the current fare structure. This could lead to an increase in subsidies or a deficit in maintaining current operations.

Road Transport and Highway Secretary ABM Amin Ullah Nuri said, "The machine will not detect loose change. Moreover, it is not easy to collect fares through machines after adding VAT.”

"We will convene a meeting with the NBR on Thursday to streamline procedures. We hope that we will be able to reach a coordinated arrangement at the meeting," he added.

When asked if the previous fare would remain unchanged, he responded, "The NBR has set the VAT; it's their decision on when to collect it. We aim to establish a unified system that considers everyone's aspect."

REACTIONS TO VAT POLICY

Passengers have to pay 15 percent VAT on all types of air-conditioned transport in Bangladesh. Metro trains are also air-conditioned, so VAT should be included according to the policy.

However, the NBR exempted VAT on metro rail fares from Dec 28, 2022, considering the passengers’ benefits.

In a letter dated Apr 4, the NBR informed the DMTCL that VAT will be levied on metro rail services and tickets from July.

Compared to India, metro rail fares in Bangladesh are already higher. The imposition of VAT has sparked strong reactions from passengers.

Various organisations and social groups, including DMTCL, have requested not to impose VAT on the metro rail.

Road Transport and Bridges Minister Obaidul Quader is not in favor of

imposing VAT on the metro rail.

Speaking at a programme in Dhaka on Apr 5, the minister said: “We don’t know anything about this. We will discuss this with the prime minister. Metro rail is a special service of public transport; the people are getting its benefits.”

"We haven't made any decision on this matter. I am not aware of who rushed to report such news before any high-level government decision," he added.

Later, on May 19, during another event in Dhaka, Quader said he had requested Prime Minister Sheikh Hasina to reconsider the decision to impose VAT on metro rail.

The minister said, "Even in India, there is no VAT on metro rail. So why should we impose a 15 percent VAT?"