VAT hike won’t significantly affect commodity prices: Salehuddin

Finance Adviser Salehuddin Ahmed said that even with the increase in VAT on certain products, there will be minimal impact on the prices of goods. 

He shared this in response to questions after a Cabinet Committee on Government Procurement meeting on January 2. 

The Council of Advisers approved amendments to the Value Added Tax and Supplementary Duty Act, increasing VAT on 43 products and introducing VAT on some items. 

Salehuddin emphasised that the rise in VAT would not affect essential goods, as customs duties on them have been reduced to zero. 

He pointed out that inflation drivers like rice and pulses are unaffected.

Regarding specific sectors, VAT has been raised for 3-star and higher restaurants with turnovers above Tk 50 lakh, but not for smaller establishments. 

For airfares, the Tk 200 VAT hike deems marginal, noting the increasing frequency of domestic flights. The adviser added that in comparison to global standards, Bangladesh's tax rates remain low, particularly for essential goods, where the government has committed to lowering taxes.

Salehuddin explained that this decision, made five months into the interim government, was necessary to address a substantial revenue gap while ensuring key sectors like education, health, and IT would see increased funding. 

He also confirmed that the decision was not influenced by the IMF but based on domestic fiscal needs.

The adviser reassured that the average consumer would not bear the burden of the 15% tax increase, as they would receive input rebates. 

He expressed confidence in the economic stability achieved so far and noted ongoing improvements in the banking sector.

Salehuddin affirmed that the government’s fiscal approach would help avoid long-term borrowing and support economic growth without harming the public.