VAT on essentials up, raw materials down

Aug 04, 2023

Finance minister AHM Mustafa Kamal in his budget speech on Thursday proposed to impose a value added tax and additional tariffs on a number of products to raise the tax-GDP ratio.

He also proposed extending the existing tariff facilities and amending a number of existing policies to promote local industries.

He proposed imposing 15 per cent VAT on ballpoint pens at the manufacturing stage and 5 per cent VAT on software production and customisation services.

Kamal proposed a 5 per cent VAT at the local manufacturing stage on polypropylene staple fibre and continued the existing exemption on imports of basic raw materials until June 30, 2024.

He also proposed raising 7.5 per cent VAT from the existing 5 per cent on locally manufactured iron or steel (LPG cylinders).

The finance minister also proposed to extend the notification period till June 30, 2024, for mobile phone manufacturers and assemblers by imposing 2 per cent instead of 0 (zero) per cent, 5 per cent instead of 3 and 7.5 per cent instead of 5 per cent respectively, at the local stage.

A 7.5 per cent VAT instead of 5 per cent on aluminium and kitchen or other household articles, sanitary ware, all types of plastic tableware, kitchenware, household articles, hygiene, and toilet articles, including any similar products except for tiffin boxes and water bottles, and sunglasses has also been proposed.

The finance minister also proposed 7.5 per cent VAT instead of 5 per cent on kitchen towels (24-26 gsm), toilet tissue (18-24 gsm), napkin tissue (20-24 gsm), facial tissue/pocket tissue (12-16 gsm), hand towels, paper towels, or clinical beds.

He proposed raising the existing exemption limit for handmade biscuits to Tk 200 per kg from Tk 150 and for cakes (excluding party cakes) to Tk 300 per kg from Tk 250 to reduce the existing 15 per cent tax rate to 7.5 per cent.

He also proposed the exemption of VAT at the manufacturing stage on cut fabrics and waste pieces, taps and braids of man-made fabric, and coconut or copra waste at the manufacturing stage, which is used as animal feed.

He also proposed the exemption from VAT at the production stage for anti-malarial and anti-tuberculosis drugs.

The finance minister proposed to increase the price level of low-slab 10-stick packs of cigarettes to Tk 45 and higher and the supplementary duty to 58 per cent. He also proposed to increase the price level of medium slab 10-stick packs of cigarettes to Tk 67 and higher, high slab to Tk 113 and higher, and premium slab to Tk 150 and higher.

The rate of supplementary duty for these three slabs will remain unchanged at 65 per cent, according to the budget proposal.

He also proposed to keep unchanged the minimum retail price of non-filtered 25- 172 stick/pack bidi at Tk 18, 12-stick/pack bidi at Tk 9 and 8-stick/pack bidi at Tk 6 and 30 per cent supplementary duty for all.

He proposed to continue the existing price of filtered 20-stick/pack bidi at Tk 19, 10-stick/pack bidi at Tk 10, and supplementary duty at 40 per cent for all.

He also proposed to increase the Total Tax Incidence (TTI) on the import of shelled cashew nuts from 15.25 per cent to 43 per cent and also proposed to levy 15 per cent VAT at the import stage on non-fortified Basmati rice and impose a 20 per cent supplementary duty on the import of processed nuts and processed fruits.

He also proposed imposing a 150 per cent supplementary duty on the import of electronic cigarettes.

To encourage the expansion of heavy industries in the country, the finance minister proposed increasing the existing customs duty to 15 per cent on lifts and skip hoists.

He also proposed to increase the existing specific rate of duty on cement clinker from Tk 500 to Tk 700 per tonne and to increase the specific rate of duty from Tk 750 to Tk 950 for commercial importers.

To protect the domestic software industry and to prevent false declarations and duty evasion, he proposed to impose 25 per cent customs duty and 15 per cent VAT on the import of software and also increase the customs duty from 1 per cent to 10 per cent on electric panels.

He also proposed to increase the customs duty from 10 per cent to 15 per cent on the import of freewheel sprocket wheels for bicycles.

The finance minister also proposed raising sandwich panels’ customs duty from 1 per cent to 5 per cent. He also proposed increasing the customs duty on goggles and parts from 5 per cent to 25 per cent.

The finance minister also proposed imposing a regulatory duty of 20 per cent on the import of face wash.

He also proposed to increase the existing regulatory duty on adhesive or glue from 0 per cent to 15 per cent and to increase the existing supplementary duty on cigarette paper imported by commercial importers from 100 per cent to 150 per cent.

The finance minister also proposed exempting advance tax on the import of rice transplanters, dryers, all types of sprayer machines, potato planters used in agriculture, containers of all types, a solar-powered water distillation plant to produce fresh water from sea salt water, aircraft engines, turbojets, and aircraft parts imported by registered airlines.

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