VAT exemption mostly on food products, less on education
The National Board of Revenue (NBR) exempts Value Added Tax or VAT on goods and services to provide relief to citizens and facilitate industrialisation. In 2022, about 1 lakh 29 thousand 570 crores of VAT has been exempted on various goods and services. Among them, agriculture and food sector got the most VAT exemption. Those concerned say that even if there is more exemption, it has not affected the market.
According to NBR's 'Bangladesh VAT Expenditure Report 2023-24' published for the first time, the food and beverage sector along with agricultural activities has benefited the most by getting VAT exemption equal to 2.25 percent of the Gross Domestic Product (GDP) in 2022. It is followed by clothing and footwear sector zero decimal 20 percent, housing sector zero decimal zero 4 percent, energy and electricity sector zero decimal zero 8 percent and medical expenses zero decimal zero 7 percent. The education sector has the lowest VAT exemption, which is only 0.02 percent of GDP. On the other hand, no VAT exemption has been given to household goods.
An official of NBR, who did not wish to be named, told Jago News, "There is no VAT on agricultural products such as paddy, rice, grains, vegetables, fish and meat. The impact of this VAT exemption is to some extent on the market. The prices of many food products in the market are still low compared to neighboring countries. The government has instructions to bring relief to the market by reducing the prices of daily commodities.
The official of NBR said, "Many organizations of the government are working to control the market. However, due to the global economic situation and the increase in demand compared to supply, the prices of daily necessities may increase.
According to the recent data of private research institute Center for Policy Dialogue (CPD), the price of consumer goods alone has increased by 310 percent in the last five years in the country. Prices of rice, sugar, soybean oil and beef are higher in Bangladesh than in the world market. Tax benefits have been given by fixing the prices of consumer goods at various times to rein in the market. Even raids have been fined. However, there was no change in the situation despite various initiatives.
Before last Ramadan, NBR exempted duty and VAT on rice, oil, dates, sugar. Although consumers have to buy these products at high prices during Ramadan. In this case, traders have shown multiple excuses to increase the price. These include insufficient VAT exemptions, imports before exemptions, fuel price hikes, wars in Europe and the Middle East.
In this regard, the senior vice-president of FBCCI, the top organization of businessmen. Amin Helali told Jago News, "There is an effort by the government to control the market. But due to some unscrupulous traders and hoarders, the people are not getting the benefits of the government initiatives. FBCCI is not on the side of any dishonest businessmen.
Apart from food, health, education and other sectors enjoy VAT exemption or reduced rate of VAT. However, the stakeholders demand to increase the VAT exemption in the education sector.
If you want to know, General Secretary of Bangladesh Primary School Teachers Association. Shamsuddin Masud told Jago News, "The price of a marker pen is 50 to 60 taka. But it cannot be used for more than two days. Similarly, the price of various educational materials including books is also very high. The government needs to provide more facilities in this sector.
In 2022, VAT exemption decreased by 17 percent
According to the report of NBR, in 2022, NBR has exempted 1 lakh 29 thousand crores of VAT on various goods and services, which was 1 lakh 55 thousand crores of rupees in 2021. That is, the discount amount has decreased by 16.79 percent.
Those concerned say that NBR is gradually trying to get out of the culture of tax evasion. If there is no exemption, tax collection and subsequently tax to GDP ratio will increase. The government is looking to identify sectors which have been enjoying tax benefits over the years and have achieved self-sufficiency. In this regard, the International Monetary Fund (IMF) is under pressure.
Taufiqul Islam Khan, Senior Research Fellow of CPD said, "Such exemptions are a major reason for low revenue collection. But essential products need to be exempted. Because these directly affect the low income people. NBR's plan to reduce VAT exemption and good governance to prevent VAT evasion is needed by this economist.
The NBR report identified areas for improvement in VAT exemption and made six recommendations. Recommendations include redefining eligibility criteria, distributive impact assessment, periodic assessment, impact assessment of VAT exemption, monitoring of who is eligible for VAT exemption and rationalization of VAT exemption across sectors.
Meanwhile, although there are various government initiatives including VAT exemption, the prices of daily necessities are not coming to a bearable level due to the active syndicate, said Golam Rahman, President of Consumers Association of Bangladesh (CAB). He told Jago News, "Syndicates are active on various pretexts and are cutting the pockets of consumers. The syndicate must be broken. It is increasing in the case of imported daily necessities.
SM/NMA
