A major amendment to the value-added tax law is on the anvil to hike the standard VAT rate on 42 items up to 15 per cent under government bid to enhance revenue, as suggested by a multilateral donor.
In some cases, as per the changes being made to the VAT law through an ordinance, the all-encompassing tax would be far higher than the existing pared-down rates.
The items likely to see the hike include medicine, restaurant, residential hotels, sweetmeats, biscuits, and brand dresses, officials said.
Also, the ceiling of turnover to go VAT-free will be brought down to Tk 3.0 million from Tk 5.0 million. So, businesses having annual turnover above Tk 3.0 million will now fall under this tax dragnet.
And VAT rate for the businesses having a turnover above Tk 5.0 million and up to Tk 30 million would be hiked to 15 per cent. Businesses within this bracket are currently enjoying a reduced rate of VAT at 4.0 per cent.
Furthermore, supplementary duty on cigarettes and excise duty on air tickets may go up in the upward readjustment in the fiscal intervention by the interim government.
Already, the Advisory Council has approved some of the proposals while some have been sent back to the National Board of Revenue (NBR) for a recheck.
Officials said an ordinance amending the VAT and SD act might be issued next week after getting the vetting from the Ministry of Law, Justice and Parliamentary Affairs and finally from the President.
According to initial lists, VAT on medicine at trading stage may go up to 3.0 per cent from the existing 2.4 per cent.
However, VAT officials said, the rates might be revised to narrow the increase following the advisory council’s recommendation.
This value tax on restaurants might soar up to 15 per cent from the existing 5.0 per cent.
Residential hotels may have to pay 15 per cent in a rise from the existing 7.5 per cent.
Brand-dress consumers may be required to pay higher at 15 per cent from the existing 7.5-percent rate.
Consumption of biscuits may also be costlier with VAT hike up to 15 per cent from 5.0 per cent.
Supplementary duty on cigarettes might be increased to 67 per cent from the existing 66 per cent.
Excise duty on all types of air tickets that has remained unchanged since 2017 may go up now. The tax rate on domestic air tickets would go up by Tk 200 against Tk 500 to Tk 700. For SAARC countries, excise duty would go up to Tk 1,000.
Excise duty on both domestic and SAARC countries is the same now. For non-SAARC Asian countries, the duty would be Tk 2500 instead of Tk 2000.
For EU, USA and other zones, excise duty would be Tk 4,000, up by Tk 1,000. However, excise duty for Hajj passengers would be waived as usual.
Talking to the FE, Barrister Bodruzzaman Munshi, second Secretary of the VAT policy wing of the NBR, said small business, especially services sector, would not be affected with these changes as they have not been under the purview of turnover VAT since 2019.
He also said the NBR has to meet the target of the International Monetary Fund (IMF) on increases in the tax-GDP ratio by an additional 0.2 per cent, a total of 0.6 per cent this fiscal year.
“We need to mobilize additional Tk 120 billion to achieve this target this year,” he added.
Standard rates would be applicable to all items across the board gradually, save a few exceptions, he added.
Currently, there are seven different rates of VAT for different items. thefinancialexpress.com.bd
