Businesses with annual turnover of up to Tk 20mn exempted from tax

The government has decided that businesses and professional establishments with annual turnover of up to Tk 20 million will not have to pay turnover tax.

The National Board of Revenue (NBR) had imposed a 1 percent turnover tax in the current fiscal year’s budget. However, the tax authority has now withdrawn that provision and issued a notification on Monday.

Previously, the turnover tax rate was 0.60 percent.

Turnover tax refers to a tax imposed at a fixed rate on the income generated through sales or services by a business, company or professional establishment, regardless of whether the entity makes a profit or incurs a loss.

The NBR introduced the provision to discourage businesses from avoiding corporate tax by showing losses. However, the measure has also been described as a “black law.”

This is because many businesses may genuinely incur losses but still become liable for turnover tax, raising questions about the fairness of such taxation.

According to the NBR’s new notification, businesses and companies with annual turnover of between Tk 20 million and Tk 40 million will have to pay turnover tax at a rate of 0.5 percent. In other words, the 0.5 percent tax will apply only to the amount exceeding Tk 20 million.

Businesses and companies with turnover exceeding Tk 40 million will continue to pay the 1 percent minimum tax, as before.

The move is expected to primarily benefit small and medium-sized businesses.

Earlier, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), the country’s apex trade body, had called for a gradual withdrawal of the 1 percent minimum turnover tax imposed on businesses and companies. The Dhaka Chamber of Commerce and Industry had also written to the NBR making the same demand.

However, industrial enterprises are eligible to pay turnover tax at a reduced rate of 0.2 percent instead of 1 percent for the first three years after commencing commercial production. This facility will remain in effect.

The turnover tax rate is even higher for certain sectors, and those rates will remain unchanged.

For manufacturers of cigarettes, Bidis and other tobacco products, the turnover tax is 3 percent. For manufacturers of carbonated beverages and sweets, it is 2.5 percent, while mobile phone operators are subject to a rate of 1.5 percent.

For other businesses, the budget had raised the rate to 1 percent, and it is this provision that the government has now revised.