Government backs out, 15% VAT not to be enforced in next fiscal

Finance Minister Abul Maal Abdul Muhith declared in his budget speech in Parliament on Thursday that the VAT and Supplementary Duty Act 2012 would be enforced in FY 2017-18 to collect 15 percent VAT.

He was presenting a Tk 3.41 trillion budget.

Business leaders have been strong in their opposition to the proposal, threatening to go on strike if it was passed.

In his budget speech, the minister said the Act was adopted in 2012 after much deliberation. But the new system for enforcing VAT at every stage of production demands that goods and services providers keep proper accounts at the lower tiers, he said.

“Unfortunately, the necessary preparation for achieving the above objective is far from satisfactory.

“Under the circumstances, the government has decided not to fully implement the new Act from the next financial year. Rather, the government has decided to fully implement the new Act from July 1, 2017”

#VAT and Supplementary Duty Act from 2012 could not be implemented due to pressure from businesses.

#The law calls for imposing 15 percent VAT on all businesses, big and small, but exempts those with an annual turnover of less than Tk 3 million.

#Businesses, opposing 15 percent tax on sales, favour the ‘package VAT’ system set by the NBR based on type and location of the business. The highest VAT amount under this system in Dhaka and Chittagong cities is Tk 14,000.

Revenue target for the new fiscal year has been set at Tk 2.42 trillion, and the finance minister hopes VAT will supply 727.6 billion, which is 35 percent higher than the last fiscal.