Chapter Ten
Revenue Collection Activities
Madam Speaker
227. As in every year, the major portion of the total budget expenditure will be mobilised from internal resources that will be collected by the National Board of Revenue (NBR). The target of internal revenue is set based on budget size. There are mainly two sources of revenues: NBR revenue, non-NBR revenue. Almost 85 percent of the total revenues is collected by the NBR. Although the main purpose of the NBR is to collect revenue, various types of tax exemption, reduction in rate or tax benefits have been given with respect to income tax, VAT and customs duty for the sake of industrialisation, employment generation, increase of business scope, protection of domestic industries, attraction of foreign investment and establishment of a just and equitable society. In spite of the fact that
our tax-GDP ratio is comparatively low, the revenue income has sustained growth every year.
228. Against the backdrop of prevailing uncongenial atmosphere in business due to COVID-19 pandemic from March of Financial Year 2019-2020, our revenue growth up to April, 2021 of the current Financial Year is 9.63 percent. The revenue collection process of the Financial Year 2020-2021 is going on. Despite of the continued slow-down of business throughout the year, we tried to keep up the pace of our economy and GDP. However, the apprehension remains that the economy will not come to normalcy in the coming financial year. We formulated our fiscal policy taking the COVID-19 pandemic, recession and instability of world trade and commerce into account. In consideration of the impact of COVID-19 pandemic in business, we, in this budget, put emphasis on protection of public health, employment creation and speeding up the pace of our economy along with revenue collection.
229. We have taken practical measures to provide easy and seamless services to the taxpayers, businessmen and citizen through automation and digitalisation of Income Tax, VAT and Customs Departments under the NBR. The reform measures taken so far have already been implemented. E-payment services have been initiated through establishment of necessary interfaces with the Bangladesh Bank for online payment of taxes. Now, the taxpayers can pay their taxes from home at their convenient time through their own bank accounts without physical presence at the premises of Bangladesh Bank or the Sonali Bank.
230. The internal sources will be the main field of revenue collection for uninterrupted economic progress amid global economic stagnation.
Keeping the prevailing circumstances in mind, we want to bring the taxpayers under the tax net through reforms in tax systems, expansion of tax scope and motivating the taxpayers and all e-TIN holders to submit their annual tax returns voluntarily. The Income Tax Departments have already taken steps for return submission of non-filer companies. The National Board of Revenue and Institute of Chartered Accountants of Bangladesh (ICAB) have jointly introduced Document Verification System (DVS) to determine the authenticity of the audited statements of accounts submitted by the taxpayer companies. This initiative will bring transparency in disclosed income of the companies. An activity regarding system integration between National Board of Revenue and Bangladesh Road Transport Authority is going on with a view to exchange of information, pulling and storing of data and checking the authenticity of stored information. We hope that this initiative will be helpful in identification of new taxpayers and prevention of tax evasions. E-TDS system has also been introduced for monitoring of tax deduction and collection. We have taken all necessary measures so that the taxpayers can submit their annual income tax return online from next year. This initiative will help the taxpayers for submission of their income tax return conveniently and as a result, number of new taxpayers will also be increased
231. After simplification of value added tax act and rules in accordance with international best practices for creating business friendly environment, Value Added Tax and Supplementary Duty Act, 2012 has been implemented since 01 July, 2019. Automated online registration is a mentionable achievement of this Act. So far, more than two lac taxpayers have received 13 digits registration number online. To make the registration system more dynamic and reliable, activities are going on for establishing interfaces with the Registrar of Joint Stock Companies and Firms, Office of the Chief Controller of Imports and Exports, National Identification Card authority, City Corporations and Commercial Banks.
232. The VAT Online Project is working for bringing transparency in VAT collection and establishing an ICT based VAT administration system. This initiative has resulted submission of about 70 percent online VAT return so far. In order to ensure easy, transparent and hassle-free VAT collection, from August 2020, The NBR has started installing EFD (Electronic Fiscal Device)/ SDC (Sales Data Controller). 3,000 EFDs/ SDCs have been installed in business establishments in Dhaka city so far under this project. To make this initiative 100 percent effective, the consumers are being rewarded through lottery on EFDMS issued invoices
every month. We are hopeful that the general consumers will make this project successful.
233. A new Customs Act, 2021 is being formulated in accordance with international best practices followed in worldwide customs management.
The law is now at the vetting stage. It will be placed in the Parliament very soon. The Customs Department has been using automated customs management system since long. The activities of customs department are being operated under the Web-based ASYCUDA World system interfacing with the computer system of the Bangladesh Bank, the Sonali Bank, the Navy and the Chattogram Port Authority. It has facilitated E-LC management monitoring, prevention of money laundering, dangerous cargo monitoring and assessment of exported and imported goods and container management through manifest data sharing.
234. Different types of reform activities are going on to enhance the capability of the revenue administration. All the training academies under the National Board of Revenue have been modernized where time befitting training activities are being organized regularly. Expansion of revenue administration including the National Board of Revenue is going on with a view to improving the quality of services and enlarging the scope of tax. We believe that we will be able to achieve the estimated revenue target of the financial year 2021-2022 through effective tax policy, efficient tax management and participation of all stakeholders including the businesspersons.
Chapter Eleven
Income Tax, Value Added Tax and
Import-Export Duty
Direct Tax: Income Tax
235. Direct tax or income tax is the key agent for tapping internal resources as well as mitigating social and economic inequalities. At present, the share of income tax to the total revenue collected by National Board of Revenue stands at around 35 percent. In recent years income tax recorded an average growth rate of 15 percent or above, and this growth is continuously maintaining an upward trend. Considering 2013 as the base year, the growth recorded in tax net is 455 percent; which is expected to improve even further by the policy interventions initiated through this budget. Analysis of facts and figures of different countries of the world reveals a growing tendency of income and social inequality among the citizens as an outcome of economic growth. The main objectives of imposing income tax are to ensure reduction in income inequality and establish social justice by providing adequate revenue for the overall development of the country, ensuring macro-economic stability, bringing discipline in public financial management through redistribution of wealth with a view to establishing a largely welfare state. Formulating a welfare-oriented and people-friendly income tax law is an important agent in achieving these objectives. In the proposed budget, policy initiatives have been undertaken with a view to mitigating the damage to the global and local economy already caused by COVID-19 including its impending fallouts, dissipating social inequality, promoting high-tech industries, developing skilled human resource, upgrading the standard of health services and creating an overall environment conducive to business and investment.
236. After taking charge in 2009, the government has initiated a taxpayer, business and investment friendly philosophy in collecting taxes.
The crux of the philosophy is to facilitate and encourage investment in the economy by gradually easing out the burden of tax payment. You are well aware that the tax-free income ceiling for individual taxpayers has been significantly increased to Tk. 3,00,000 in FY 2020-2021 from what was only Tk. 1,65,000 in FY2009-2010; and this tax-free ceiling is even higher for the females, senior citizens, physically challenged and the wounded freedom fighters. The tax rate for companies not listed in the stock market has gradually been reduced to 32.5 percent in FY2020-2021 from what was 37.5 percent in FY2009-2010. This issue has again been addressed this year, deliberations on which is recorded in the later part of my speech.
Also, in light of this policy, the tax rate for companies listed in the stock market and banks, insurance companies and financial institutions has gradually been reduced from 27.5 percent and 42.5 percent to 25 percent and 37.5 percent respectively between FY2009-2010 and FY2020-2021.
Continuation of this befitting policy has offered comfort to the taxpayers and has also generated investment and created employment opportunities in the country.
At this point, I present before this august House some important proposals related to income tax for the FY2021-2022:
237. The present ratio of private investment to GDP stands at 23 percent. The government has taken initiatives to improve this ratio.
Reduction in corporate tax rate is expected to facilitate achieving the target for private investment to GDP ratio. In line with the ongoing trend of globalization and in light of the ongoing COVID-19 situation, revisiting the existing tax rate in Bangladesh is a demand of the time. A competitive
tax rate coupled with the prevailing business-friendly environment will make a significant contribution towards expansion of trade and commerce and industrialization in the country. Keeping these as well as the expectation of the business community in mind and to pave the way for rapid growth of trade and commerce, the corporate tax rate was brought down to 32.5 percent from 35 percent in FY 2020-2021. I propose to further reduce the tax rate for companies not listed in the stock exchange to 30 percent from 32.5 percent, and the tax rate for listed companies to 22.5 percent from 25 percent for FY 2021-2022. The existing tax rate of 32.5 percent for companies is also applicable for One Person Companies (OPCs). With a view to further formalize the economy and to encourage formation of One Person Companies, I propose a tax rate of 25 percent for the One Person Companies.
238. You are aware that in some cases artificial juridical persons used to enjoy the facility of paying taxes at the rate applicable for individual taxpayers, which is inconsistent with our philosophy of taxation. I, therefore, propose to fix the rate of income tax for artificial juridical persons and other entities, not otherwise defined, at 30 percent instead of the rate applicable for individual taxpayers. The applicable rate of tax on income arising out of operation of private universities, private medical, dental and engineering colleges as well as private colleges engaged solely in imparting education on ICT has been reduced to 15 percent through an SRO. I propose before this august House to include this rate of 15 percent in the Finance Act.
239. I propose the following overall corporate tax rate for FY 2021- 2022 applicable for all classes of taxpayers other than individuals:
Tax rate for company and others:
240. I propose to keep the rate of tax applicable for individual taxpayers unchanged as significant changes have already been brought to this effect in FY 2020-2021. The existing tax rate for individual taxpayers is also applicable for the taxpayers of the third gender. With a view to achieving social inclusion of the third gender, besides introducing a special
provision, I propose to fix the tax-free ceiling at Taka 3,50,000 for this community.
241. The present government is determined to create business friendly environment by ensuring ease of doing business. In particular, the government is always motivated to reduce the tax burden of the individual taxpayers engaged in business. To this effect, I propose to reduce the rate of business turnover tax for individual taxpayers to 0.25 percent from 0.50 percent.
242. One of the major objectives of imposing direct taxes is to reduce economic inequality. Provisions of imposing surcharge along with income tax on the wealthy people depending on size of wealth are already there to meet this objective. For easy and simple application of surcharge, I propose five slabs in place of the existing seven. Moreover, I propose to withdraw the provision of paying surcharge on wealth when there is no taxable income, and also to withdraw the provision of paying minimum surcharge. This will make compliance with the provisions of surcharge easier, and will also decrease the tax burden of the middle class.
243. The present government is following the principle of gradual expansion of the tax base in one hand and reducing the rate of taxes on the other. In line with this policy, I propose to reduce the rate of tax to be deducted at source to 7.5 percent from 10 percent for a resident contractor providing certain services to a non-resident. Moreover, considering the welfare of the poor workers, I propose the provision of not making any deduction at source on payment to workers, not having any taxable income, up to Taka 25,000 from workers’ participation fund.
244. Financial inclusion, formalization of the economy and expansion of tax net are of utmost importance to national economy. To this end, I make the following proposals in the budget:
a) To include Mobile Financial Service (MFS) as a means of payment along with bank transfer where making payment through bank transfer is a mandatory provision;
b) To make payment through crossed cheque or bank transfer or mobile financial service (MFS) mandatory where the amount exceeds Taka 50,000;
c) To make rate of tax deduction 50 percent higher than the applicable rate where the bills are not received through banking channel or mobile financial service (MFS) by suppliers and contractors;
d) To make having TIN mandatory in cases of obtaining approval of plan for a building, obtaining registration for a cooperative society and for purchasing sanchaypatra exceeding Taka 2,00,000 and opening a postal savings account exceeding Taka 2,00,000;
e) To define the e-commerce platform as a source tax deducting authority. If these proposals are endorsed by this august House, the size of the formal economy of the country will get bigger, and investment and revenue collection will increase significantly. By allowing transaction through mobile financial service (MFS) along with bank transfer, this widely used modern technology has been formally recognized in our tax law. This will ensure a business-friendly environment.
245. We, the Bengalis, live on fish and rice. Hence, with a view to promoting fish farming, this sector has long been enjoying the reduced tax rate facility. Keeping this privilege in place, I propose to rationalize the existing tax rate and introduce only one additional slab of tax on income from fisheries exceeding a certain limit.
246. The rate of depreciation allowance under the existing provisions of the Income Tax Ordinance requires to be rationalized in light of the economic life of the ordinary and factory buildings owned by a company.
In order to rationalize the existing rate, I propose to fix the rate of allowable depreciation of ordinary building at 5 percent from 10 percent, and that of a factory building at 10 percent from 20 percent.
247. The present government is relentlessly working to integrate the marginal and the underprivileged population of the country into mainstream society and economy. The third gender community belongs to the marginal and the underprivileged section of the society. Compared to others, the third gender community is lagging behind in socio-economic standards and left outside the mainstream society. Social inclusion can be ensured by involving active people of this community into production-oriented occupation. Against this backdrop, I propose to enact special tax
incentives with a view to providing employment and ensuring rise in living standards and social and economic integration of the members of the third gender. Provision of tax rebate, amounting to 75 percent of the total salary paid to the workers from the third gender or 5 percent of payable tax, whichever is lower, to the employers who will employ 10 percent of their total work force or more than 100 workers of the third gender, has been placed for the approval of this august parliament.
248. This is the age of ICT. The present government is attaching highest importance to the ICT sector. The existing tax exemption provided to the ICT sector needs to be further expanded in order to take the government’s vision of building a digital Bangladesh one step forward. I propose to further expand the existing 22 ITES services enjoying tax exemption in this budget. This will give impetus to the digital transformation process of Bangladesh, will make modern digital services easily available to the citizens at a low cost, and will also make a positive impact in materializing the dream of building a digital Bangladesh. This will also create young entrepreneurs in the country. With these ends in view, I propose to offer tax exemption facility to providers of cloud service, system integration, e-learning platform, e-book publications, mobile application development service and IT freelancing until 2024. In addition, I propose to offer tax exemption, subject to certain conditions, for ten years on production of some selective IT hardware if manufactured in Bangladesh.
249. Economic empowerment of women is of paramount importance in achieving social and economic progress and sustainable development of a country. Rise in the number of women entrepreneurs along with their male
counterparts will ensure economic and social empowerment of women. As a special incentive to the SME sector and also for the sake of development of the women entrepreneurs working in the SME sector, I propose to keep up to Taka 70 lac of business turnover of the women entrepreneurs outside the purview of taxation. I hope both the women entrepreneurs and the SME sector will be benefitted from this tax exemption facility.
250. The government is pledge-bound to nurture the ‘Made in Bangladesh’ brand to accelerate establishment of mega industries and production of import-substitute industrial goods in the country. In this connection, I propose to provide tax exemption, subject to certain conditions, to the companies engaged in production of three and four wheelers in Bangladesh for ten years which may be extended to further ten years on the fulfillment of certain other conditions. I also propose to provide tax exemption, subject to certain conditions, to the companies engaged in production of certain home and kitchen appliances as well as light engineering products for ten years.
251. It is irrefutable that Bangladesh holds unlimited prospect in agro based industries. Flourishing of agro based industries and generation of employment are possible through production of import substitute agricultural products in Bangladesh. Moreover, at this time of free trade, it is possible to take a substantial share of the global export market through value addition and diversification of agricultural products. Taking these into consideration, I propose to offer tax exemption, subject to certain conditions, for ten years to industries engaged in processing locally grown fruits and vegetables, producing milk and dairy products, producing baby food entirely from locally grown agricultural products, and manufacturing of agricultural machineries.
252. Cement, iron and iron products are the key components of infrastructural development. If tax incentive is provided to the industries engaged in production of these items, development of physical infrastructure will be easy and cost-effective. In this context, I propose to reduce the rate of tax on import of raw material related to cement production from 3 percent to 2 percent. I also propose to reduce the rate of tax deduction at source on supply of cement, iron and iron products from 3 percent to 2 percent. I am hopeful that these measures will help these industries to flourish and also enable them to make a positive contribution to the infrastructural development of the country.
253. The government is sincerely promise-bound to ensure standard health care facilities at an affordable cost for each and every citizen of the country with a view to achieving the sustainable development goals. The present government has taken healthcare facilities to the doorstep of the people through community clinics established in every ward. Meanwhile, the standard of specialized health services has also improved substantially.
However, the role of the private entrepreneurs in this sector is extremely city-centric. Therefore, along with government initiatives, to make standard health services provided by private initiatives available in districts other than Dhaka, Narayanganj, Gazipur and Chittagong, I propose to offer tax incentive to the health sector. In this connection, I propose to offer tax exemption, subject to certain conditions, to general hospitals with a minimum of 250 bed capacity and having child and infant care, women and mother care, oncology, wellbeing and preventive medicine units, and also to specialized hospitals with a minimum of 200 bed capacity for ten years. These hospitals are to be established in districts other than Dhaka, Narayanganj, Gazipur and Chittagong.
254. Availability of skilled human resource and small entrepreneurs are important catalysts for industrialization. At present there is a huge deficit of high standard technical training institutions in the country. As a result, Bangladesh is failing to reap the full benefits of the demographic dividend. In the run up to graduation of Bangladesh as a middle-income country and creation of a pool of skilled human resource for industrialization, it is a necessity to provide tax incentives to private institutions engaged in imparting specialized technical training. To this effect, I propose to offer tax exemption, on certain conditions, for ten years to institutions established to impart all sorts of diploma and vocational education on agriculture, fisheries, science and IT, and also to institutions engaged in delivering professional training on automobile, aircraft maintenance, food, footwear, glass, mechanical, shipbuilding, leather, refrigeration, ceramics, mechanist, garments design and pattern making, pharmacy, nursing, integrated medical, radiology and imaging, ultrasound, dental, animal health and production service, clothing and garment finishing and poultry farming. This incentive will hopefully make a positive impact on building skilled and trained human resource, and will also open up a new horizon for industrialization.
255. The government has decided to provide policy support in building a strong bond market as an alternative to banks for sourcing long term finance to entrepreneurs. As a part of this policy, I propose tax exemption on the applicable capital gain tax at the time of transferring property to a trust or Special Purpose Vehicle, or transferring property by a trust or Special Purpose Vehicle, vice versa, with a view to popularizing and creating a strong market for Sukuk or Islamic bond. If endorsed by this august House, this will facilitate collecting long-term capital and reduce bank dependency. This will also add impetus to the economic activities by developing bond market, which, in turn, is expected to have a positive impact on development and growth of infrastructure and capital-intensive industries in Bangladesh
256. At present, irrespective of being new or old, advance tax at the time of registration and renewal of survey certificate of marine vessels is collected at the same rate. Compared to the new ones, old marine vessels have lesser capacity to carry passengers. Moreover, the operating cost of old vessels is relatively higher. Considering all these factors, I propose a tax rate of Taka 100 per passenger instead of Taka 125 at the time of renewal of survey certificate of old marine vessels plying for ten years or more from the date of registration.
257. As a part of the digital tax management system, instead of making payment through treasury challan, pay order, demand draft and cheque, I propose to make payment of tax up to Taka 5 lac solely through automated challan or e-payment as mandatory for making tax payment process easier, and also to ensure real time accounting and transfer of revenue collection into government exchequer. This will also bring more transparency to the management of the government revenue account and tax payment process.
258. If the proposals placed in the budget are properly implemented, the economic activities in Bangladesh will continue to be vibrant, high-tech industries will flourish, tax net and formal economy will expand, entrepreneurs will grow and employment will generate, skilled human resource will develop, and investment in industries as well as business friendly environment will be ensured. As a result, tax base will be strengthened which will eventually take Bangladesh a big step forward towards achieving Vision 2041.
Value Added Tax (VAT) Madam Speaker
259. Value Added Tax (VAT) is a modern indirect tax system. Local VAT contributes the highest amount of tax in the total revenue collected by the National Board of Revenue (NBR). Value Added Tax and Supplementary Duty Act, 2012 has been implemented since July 2019 for establishing a taxpayer friendly, revenue friendly and development friendly VAT system. Several measures have been incorporated in this year’s budget to address the difficulties faced by the business community while implementing the new VAT law. Simplification of the VAT law along with collection of targeted amount of revenue are the major considerations of this budget. Expansion of VAT net is very important to achieve the desired Tax-GDP ratio. Special attention has been given on this area. Normal growth of trade and commerce has been disrupted during the ongoing pandemic period of more than a year.
Considering the fact that many small business entities have become sick, special importance has been given in the budget so that burden of VAT do not increase and flow of working capital is continued. With the aim to increase revenue, to attract foreign investment and to develop tax compliance culture, I am placing the following proposals on VAT before this august house:
260. To make business easier, I am proposing the following measures to mitigate functional and procedural complication in the Value Added Tax and Supplementary Duty Act, 2012 and Value Added Tax and Supplementary Duty Rules, 2016:
a) To reduce tax burden for the industrial entrepreneurs of Bangladesh, I propose to decrease Advance Tax (AT) from 4 (four) percent to 3 (three) percent for import of raw materials for industries;
b) Input-Output coefficient will be applicable only for supply of Goods. I propose necessary amendment in the related section of the Act;
c) To facilitate the existing benefit of rebate by the exporters, I propose necessary amendment in the related section;
d) To make the law easier for the stakeholders, I propose to amend the definition of “Representative”, “Increasing adjustment” and “Decreasing adjustment”:
e) In case of registration of non-resident person, I propose to amend the related section;
f) VAT rate of export of service is zero percent. I propose to replace the existing section of the Act to make that clear in the law;
g) I propose to consider invoice issued by Bank, Insurance Company and Port as VAT challan;
h) To make the section related to ‘VAT deduction at source’ congruent with the VDS rule, I propose necessary amendment;
i) To make the law easier for business, I propose amendment in the section related to decreasing adjustment of VAT;
j) Proceed Realization Certificate (PRC) against export is issued by the commercial banks. Because of that I propose to abolish the provision of submitting Proceed Realization Certificate (PRC) issued by Bangladesh Bank;
k) In case of international tender, I propose necessary amendment to provide equal facility to local companies as enjoyed by the foreign companies;
l) I propose to insert new provision of deemed export as there is no such provision in the new act;
m) To provide facility of deemed export and decreasing adjustment for backward linkage industries, I propose new provision in the law;
n) To make business much easier, I propose to abolish litigation related provisions from the VAT rule which is related to adjustment from the balance of account current under the VAT Act, 1991;
o) To facilitate the VAT system, I propose to delegate the power of cancellation of VAT registration and enlistment to the “Related Officer”/ “Divisional Officer” instead of the “Commissioner” in the Act;
p) To simplify the VAT system, I propose to amend the rules related to delegation of power regarding approval of any business-related information change to the “Divisional Officer” instead of the “Commissioner”;
q) I propose necessary amendment in the VAT and Supplementary Duty Rules in line with VAT Deduction at Source Rules and Collection thereof;
r) I also propose to amend several forms under VAT Rules.
261. Excessively stringent law creates functional complication and eventually business activities get hampered. Because of that, I propose to reduce the amount of fine and rate of interest on arrear VAT in the Value Added and Supplementary Duty Act, 2012:
a) In case of VAT evasion, failure or anomaly, I propose to reduce the amount of existing fine from “twice the amount of revenue” to “equal amount of revenue” associated;
b) I propose to reduce the monthly rate of interest charged on arrear VAT from “Two percent” to “One percent”. In this case yearly interest rate will be fixed at 12 percent instead of existing 24 percent.
262. To ensure proper monitoring and to increase revenue collection, I propose the following amendments in the Act and Rules: a) To ensure proper monitoring by VAT authority in tobacco sector, I propose to insert a provision that central registration will not be applicable for the business entities which supply tobacco products; b) I propose to insert a provision in the Act prohibiting rebate if the price of any goods or service is less than the price of its raw materials;
c) I propose to insert “Chartered Accountant Firm” in the related section to assist the VAT officers;
d) I propose to insert a provision for limited companies for mandatory submission of Annual Financial Statement for the purpose of proper audit;
e) I propose necessary amendments for punishing the offences regarding manufacturing, storing, transporting, marketing or using counterfeit or fake or used stamp or band roll or helping to do such activities.
263. To keep the existing momentum of growth of local industries, I propose to continue VAT exemption facilities with necessary amendments in the following sectors:
a) Extension of existing 5 percent VAT rate for manufacturing of LPG cylinder for another year;
b) Extension of existing VAT exemption facility for manufacturing of refrigerator, freezer and its compressor for one more year;
c) Extension of existing VAT exemption facility for manufacturing of polypropylene staple fiber for two more years;
d) Extension of existing VAT exemption facility for manufacturing of air conditioner and its compressor for three more years;
e) Extension of existing VAT exemption facility for manufacturing of motor car and motor vehicle for five more years;
264. To facilitate business environment. I am presenting some more proposals before this august house:
a) At present import of ocean-going vessels get VAT exemption if they are not more than 22 years old. I propose to extend this up to 25 years. Furthermore, time limit to sale such vessels is proposed to be reduced to 3 years from existing 5 years.
b) To reduce burden of VAT on dealers and distributors of locally produced tiles and sanitary ware 15% VAT is proposed to be chargeable on the net commission only.
265. To lessen dependence on foreign goods, I propose VAT exemption on the following sectors so that those daily house hold products may be manufactured in Bangladesh:
a) VAT exemption at local production stage in manufacturing of blender, juicer, mixer, grinder, electric kettle, rice cooker, multi cooker, pressure cooker;
b) VAT exemption at production level in manufacturing of washing machine, microwave oven and electric oven.
c) Exemption of Advance Tax (AT) on certain raw materials of iron products, scrap vessel and ethylene glycol, terephthalic acid, ethylene/propylene which are used for manufacturing of PVC and
PET resin;
d) VAT exemption on manufacturing of puffed rice;
e) VAT exemption of fresh fruit at trading stage;
266. At present most of the mobile phones sold in the local market are either manufactured or assembled in our country. In this regard I propose following facilities for the development of local mobile handset industries and Information Technology (IT) sectors:
a) Extension of existing VAT exemption facility on manufacturing and assembling of mobile phone for two more years;
b) VAT exemption on local manufacturing of printer, toner cartridge, inkjet cartridge, parts of computer printer, computer, laptop, AIO, desktop, notebook, notepad, tab, keyboard, mouse, barcode/QR scanner, RAM, PCBA/motherboard, power bank, router, network switch, network device/hub, speaker, sound system, ear phone, head phone, SSD/portable SSD, hard disk drive, pen drive, micro SD card, flash memory card, CCTV, monitor (not exceeding 22″), projector, printed circuit board, e-writing pad, USB cable, data cable, digital watch, loaded PCB;
c) Inclusion of e-learning and e-book within the scope of Information
Technology Enabled Services (ITES).
267. To modernize agricultural sector and reducing production and marketing cost of agricultural machineries, I propose following VAT exemptions:
a) VAT exemption at manufacturing and trading stages of weeder and winnower;
b) Advance Tax (AT) exemption on thresher machine, power reaper, power tiller, operated seeder, combined harvester, rotary tiller, weeder and winnower.
268. The year 2020 was declared as ‘Light Engineering Products Year’ by Honorable Prime Minister. Hence, to make the provisions of exemption easier for production of capital machinery by light engineering sector so that it may flourish, I propose to make necessary amendment in the rules and reduce VAT on paper cone manufacturing from 15% to 5%.
269. To combat corona virus and to ensure health service to the citizens of the country, I propose following VAT and Supplementary Duty exemption:
a) VAT exemption at local manufacturing stage on the production of sanitary napkin to ensure health protection of women. Two years extension of existing VAT exemption has also been proposed on importation of certain raw materials used for production of sanitary napkin and diaper;
b) To continue existing exemption facility at import, manufacturing and trading stage on covid-19 test kit, PPE and vaccine;
c) Withdrawal of 10 percent supplementary duty from locally manufactured “Long Pan” to make sanitation facility cheaper for rural people;
d) VAT exemption on autism related services;
e) Continuation of existing VAT exemption on “Meditation service” to protect mental health.
270. To reduce the use of tobacco products and to increase revenue collection, I place the following proposals for tobacco and tobacco related products:
a) I propose to fix the price of lower slab of cigarette per 10 sticks at Tk. 39/- and above and supplementary duty on it to be 57 percent.
Apart from this I propose to fix the price of medium slab cigarette per 10 sticks at Tk. 63/- and above, high slab 10 sticks cigarette at Tk. 102/- and above and the price of premium slab at Tk. 135/- and above where supplementary duty for all the three slabs will be 65 percent;
b) I propose to continue existing price of non-filtered 25-stick handmade bidi at Tk. 18/-, 12-stick bidi at Tk. 9/- and 8-stick bidi at Tk. 6/- where supplementary duty will be 30 percent for all. I also propose to continue existing price of filtered 20-stick bidi at Tk. 19/-, 10-stick bidi at Tk. 10/- where supplementary duty will remain unchanged at 40 percent for both.
c) I propose to continue existing price of 10 gm Jarda at Tk. 40/- and price of 10 gm Gul at Tk. 20/- where supplementary duty will be 55 percent for both.
271. Different tasks under the project titled VAT Online Project are going on to implement new VAT Act which has become effective since 2019 in a digitalized platform. Through this project, arrangement have been made to complete all the activities in online platform from VAT registration to return submission. Meanwhile 2,57,445 business entities have received online VAT registration so far and 1,16,548 returns out of 1,97,538 have been submitted through online which is 59 percent of the total submitted returns. Apart from this, e-Payment module has already been implemented through 14 Banks which enables a taxpayer to pay his VAT revenue in government exchequer through online from his home.
Moreover, 12 modules along with Revenue Accounting Module, Refund Module, Revenue Management Module, Case Management Module etc. have been prepared. Such automation has enabled honorable taxpayers to keep record and retrieve accounting information. Moreover, it has increased transparency and accountability of VAT payers, VAT receivers and VAT Officials. It is expected that the practice of revenue culture relating to indirect tax collection in Bangladesh will greatly improve through this process.
272. Increase in the amount of government investment is a pre requisite for sustainable development in the backdrop of present economy of Bangladesh. This requires increased revenue collection. One of the alternatives to increase revenue keeping tax rate constant is to increase the tax-net. To increase revenue collection from various types of business entities, installation of Electronic Fiscal Device (EFD)/ Sales Data Controller (SDC) has already been started. Already 3,096 EFD/SDC machine have been installed in different sectors. A plan has been adopted to install 10,000 EFD/SDC in various types of business entities by June, 2022. Moreover, EFD/SDC machine will be installed in various types of business entities across the country in phases. I hope that VAT collection will be increased significantly with full scale implementation of VAT Online Project and installation of EFD/SDC across the country.
Import-export duty
273. With a view to create new employment through sustainable development of local industries and to restructure the damaged economy due to the long-term effects of global pandemic, the existing tariff structure at the import level has been made more liberal and industry friendly. After reviewing the proposals in detail received from various quarters, business organizations and stakeholders to safeguard the interests of domestic industry, trade and consumers, I am now presenting the proposals made in the budget of 2021-2022 on import duty tax through you to the august Parliament.
274. The following factors have been taken into consideration in making proposals on import duty, regulatory duty, supplementary duty and value added tax:
n Take necessary steps to recover the economy affected by the global
pandemic caused by the corona virus (Covid-19);
n Investment and employment generation and foreign exchange savings;
n Diversification of export-oriented industries and incentives in its backward linkage industries;
n Development of health, agriculture, fisheries, livestock, automobile, electronics and ICT sectors;
n Improvement of the ranking in the Ease of doing business index of Bangladesh; and
n To protect and develop local industries through rationalization of tariff structure. It will also assist in enhancement of revenue in local stage (value added tax and income tax).
275. I propose the existing 6 slabs of Customs Duty structure (0%, 1%, 5%, 10%, 15% and 25%), 3% regulatory duty on goods having highest import duty, and 12 (twelve) slabs of supplementary duty rates (10%, 20%, 30%, 45%, 60%, 100%, 150%, 200%, 250%, 300%, 350% and 500%) on import stage to continue in FY 2021-22. In addition, it has been proposed to keep the existing tariff rates unchanged for few essential commodities, fertilizers, seeds, life-saving medicines and some raw materials of certain industries.
276. On the basis of above principles, Now I would like to present sectorwise elaborated proposals in this august parliament :
(A) Agriculture sector: Madam Speaker
277. Bangladesh is still an agricultural country and agriculture is our priority sector. It has been proposed to maintain zero tariff on imports of major agricultural inputs, especially fertilizers, seeds, pesticides etc., keep the existing 0% tariff on essential food items unchanged and keep the
applicable duty on imports of other daily commodities unchanged.
278. To protect the domestic farmers, I propose to increase the tariff on carrot and mushroom imports and fix the minimum value of carrots, mushrooms, green chilies, tomatoes, oranges and capsicum.
279. In order to modernize agriculture, I also propose to reduce the import duty on agricultural inputs and to provide necessary protection to consolidate the production of agricultural machinery.
280. Although the import of edible salt (sodium chloride) has been banned in the country for a long time, there is an opportunity to import industrial salt (sodium sulphate / disodium sulphate). As the price of industrial salt differs from that of edible salt, the trend of importing edible salt through misdeclaration has been noticed. In addition, there are allegations of marketing edible salt mixed with industrial salt, which is harmful to public health. As a result, marginal salt farmers and salt mills of the country are being affected. Moreover, industry ministry has sent a request letter with recommendation to increase the duty tax of industrial salt. In order to protect salt farmers, ensure proper use of imported industrial salt and reduce public health risks, I am proposing to increase the existing tariff rate on import of industrial salt (sodium sulphate / disodium sulphate) as per with edible salt.
281. It has been proposed to expand the existing facilities for the sustainable development of the fisheries, poultry and dairy sector. In this regard, I propose to increase the tariff on processed meat imports and set a minimum value to protect the domestic meat processing industry and cattle farmers. Incentives for various sub-sectors of the agricultural sector (Table 1 of Appendix B) have been highlighted.
(B) Health sector:
282. All tariffs on import of corona virus testing kits, special types of masks and raw materials required for hand sanitizers, masks and PPE production have already been waived through special notification to combat the outbreak of Corona virus. In addition, new duty-free facilities have been provided for the import of raw materials required for the preparation of the virus detection RT-PCR kit. It is proposed to extend the duration of exemption facility from 30 June 2021 to 30 June 2022.
283. I propose to provide duty free facility on the import of Implantable ‘Occluder’ used for the treatment of children born with heart defects.
284. To protect the pharmaceutical industry, I propose to include some of the raw materials for the local production of Active Pharmaceutical Ingredients (API) in the existing concessions.
285. In order to consolidate the health sector, I propose to expand the existing concessional facilities for import of raw materials required for the production of medical products (Table 2 of Appendix B). (C) Industrial sector:
286. The importance of the industrial sector in creating employment and increasing domestic and foreign investment is immense in order to recover the economy damaged by the current global pandemic. In order to increase investment in the industrial sector, maximize the productive capacity of the existing industry through proper protection and adopt a multi-faceted expansion strategy of export-oriented industries, I propose the following sector wise proposals: (Table 3 of Appendix B).
1) Small and Medium Industries:
n In order to protect small and medium industries, I propose to increase the applicable duty on the import of some finished products made by those industries.
n I also propose to provide 1% exemption rate for the import of capital machinery to small and medium enterprises irrespective of commercial and industrial establishments.
n In order to protect the widely used paper cup manufacturing industry, I propose to provide concessional facilities for import of two major raw materials of that industry and increase the minimum value at the import stage of finished products made by them.
n In addition, I propose to provide duty-free access to some of the raw material imports of the endangered conch industry to survive.
2) Export oriented industries:
n I propose to include photosensitive rotary screen, temperature sensor and loaded PCB in the concessionary rate to protect the textile industry. In order to expand the export diversification of the potential footwear industry, I also propose to provide concessionary rate for the import of two raw materials for the footwear industry.
3) Miscellaneous steel sectors:
n To protect local LP gas manufacturing industries, I propose to expand the existing concessionary rate for those industries.
n To protect iron wire industry, I propose to impose 3% regulatory duty (RD-3%) on the import of such finished products of those industries.
n To protect the fire-resistant door manufacturing industry, I propose to provide concessionary facilities for the import of core raw materials (Cold Rolled Iron / Steel) of that industry.
n In addition, for developing the cable and internet cable manufacturing industry, I propose to reduce the tariff on import of plastic framework and coated calcium carbonate, respectively.
4) Electronics industry:
n As an adjunct of Electronics industrial sector, I propose to expand the existing concessionary rate on raw materials importation of refrigerator and compressor manufacturing industries for their protection. In order to protect the washing machine manufacturing industry, I propose to issue a new SRO. Moreover, I also propose more concession on certain raw materials of TV manufacturing industry for the development of this sector.
5) Abrasive paper industry:
n I propose to provide concessionary facilities for the import of 4 (four) raw materials (artificial corundum, aluminum oxide, coated /impregnated paper and paperboard, coated textile fabrics) of abrasive paper to protect the sand paper manufacturing industry.
6) LED light manufacturer / assembling industry:
n To ensure harmony between manufacturing and assembling industry, and also for the development of LED light manufacturing/assembling industry. I propose to reduce the existing tariff on import of parts of those industries.
7) Manufacture of gypsum board and particle board industry:
n I propose to reduce the existing tariff on the import of 3 (three) raw materials (plates / sheets / film / foil / strip of polymers of vinyl chloride, self-adhesive tape, fluting paper) required for the development of import substitute domestic gypsum board and particle board manufacturing industry.
8) Lube blending industry:
n To discourage import of environmentally harmful recycled lube base oil and lubricating oil, I propose to increase import duty on those products. I also propose to rationalize the rate of duty of lubricating oil and liquid paraffin to avoid revenue risk. To protect the lube blending industry, I also propose to decrease import duty on additives as one of the raw materials of that industry.
(D) ICT sector
287. I propose to provide concessionary facilities for the import of computer accessories and raw materials of ICT industry to protect the domestic computer / laptop and ICT product manufacturers.
288. For the expansion of cellular phone manufacturing, assembling and backward linkage industry, I propose to make the existing concessions on raw materials of that industry more investment friendly and rational. I also propose to increase tariff on import of feature phones to protect domestic industry.
(E) Automobile sector Madam Speaker
289. I propose to reduce tariffs on microbus imports to discourage the use of accident-prone vehicles like nasimon, laguna and encourage the use of microbuses as an alternative public transport. To encourage the use of environment friendly hybrid vehicles, I propose to restructure the tariffs on imports of hybrid vehicles.
290. To protect the dumper / tipper assembling industry, I propose to reduce the tariff on import of dumper / tipper in CKD condition.
291. For the development of motorcycle manufacturing/assembling industry, I propose to bring necessary adjustments and also to include some raw materials in the existing SRO.
292. Moped is a fuel-efficient motorcycle. It plays an important role in the economic activities of small traders and the public. In order to ensure affordable price, I propose to reduce the tariff rate of Moped.
Amendment of Customs Act, 1969:
293. In order to facilitate trade, to ensure national security and to establish effective customs control some necessary amendments were made in The Customs Act, 1969, which is in force every year. To coincide with the conquest of the sea, extension of Bangladesh customs-waters from the existing 12 nautical miles to 24 nautical miles, to include the offence of customs related money laundering in the definition of smuggling, to amend the base threshold and penalty amount of adjudication of customs officers in the line of present context, to specify the scope of work of Bangladesh Single Window, I propose to bring necessary amendments in the existing Customs Act, 1969.
Amendments in First Schedule of the Customs Act:
294. We have observed that there are clerical errors, inconsistencies and inequalities in the existing structure of the tariff headings and H.S Codes.
In order to simplify international trade process, I propose to amend the exiting H.S. Codes, descriptions, import duty, supplementary duty and value added tax for rectifying clerical errors, rationalization of the inconsistent duty rates, creation of new H.S Codes where necessary, deletion, correction and justification of H.S Codes and notifications
(Table 4 of Appendix B).
295. The existing minimum value of certain products have been rationalized with a view to ensure proper revenue collection and protection of domestic producers through justified valuation of imported goods.
296. If the above mentioned proposals are implemented, it is expected that economic activities will be accelerated, high-tech industries will be developed, entrepreneurs, employment opportunities and skilled manpower will be created, and an investment and business-friendly environment will be ensured. To modernize Bangladesh Customs, the National Board of Revenue has already taken some initiatives, like the upgradation of ASYCUDA World, implementation of National Single Window project, introduction of automated customs risk management, automation of bond management, introduction of authorized economic operator system etc. If all these measures are implemented in due time, Bangladesh will improve their rank in the ease of doing business index, the investment and employment will be facilitated and the wheels of the country’s economy will be further accelerated. As a result, the achievement of vision 2030 and 2041 will be accelerated keeping pace with the road map of the Hon’ble Prime Minister.
