Finance Minister AMA Muhith announced the decision to delay the imposition of 15 percent Value Added Tax (VAT) on retail businesses by a year while presenting the budget in Parliament on Thursday.
The move means that retailers will continue to pay the National Board of Revenue (NBR) specific sums in VAT annually.
The VAT and Supplementary Duty Act 2012 were supposed to have been enforced in FY 2016-17 to collect the 15 percent VAT.
Business leaders had been vocal in their opposition to the proposal, even threatening to go on strike if it was passed.
The finance minister has now backed off. “Unfortunately, the necessary preparation for achieving the above objective is far from satisfactory,” he said in the budget speech.
Abdul Matlub Ahmad, President of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), has welcomed the decision, saying it has been in keeping with the demand of the retailers.
“More discussions are needed for arriving at a permanent solution to the issue,” he told bdnews24.com.
He termed the proposed budget “friendly to trade and industry”.
The Dhaka Chamber of Commerce and Industry (DCCI) has thanked Prime Minister Sheikh Hasina and Muhith for the decision.
The DCCI issued a statement following a meeting chaired by its President Hossain Khaled.
It recommended reforms of investment-related policy alongside the development of infrastructure, power, energy and port management in order to boost investment.
The organisation, noting the 5.2 percent drop in the allocation for the power sector, recommended less dependency on import of power.
BGMEA, REHAB frustrated
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has expressed its frustration over the budget, claiming it has not safeguarded the readymade garment sector’s interests.
“I can’t tell you at this moment how the budget has been. But our sector has been harmed,” BGMEA President Siddiqur Rahman toldbdnews24.com.
He said the RMG sector, the top exporting industry of Bangladesh, was in danger.
“But the tax at source has not been cut despite so many challenges. The RMG industry will collapse if this continues,” he said.
The government has not met the RMG entrepreneurs’ demand to halve the tax at source for the sector to 0.3 percent in 2016-17 like 2014-15.
Real Estate and Housing Association of Bangladesh (REHAB) is also frustrated as “none of its 13 proposals have been considered”.
“Housing cost will rise for middle-income and lower middle-income people due to the changes in the size of the proposed income tax for the sector,” the association said in a statement.
FBCCI President Matlub also criticised the decisions that would lead to a rise in prices of house-building materials.
