Finance Minister AMA Muhith is now pushing for two different rates of value-added tax for the forthcoming VAT law in what can be described as a sharp about-turn from his stance thus far.
The revised plan for the VAT and Supplementary Duty Act 2012 was presented to the top brass of the International Monetary Fund yesterday by Muhith on the sidelines of the World Bank-IMF annual conference.
“I told them that we are not making a proposal but considering two rates,” he told reporters after a meeting held at the IMF headquarters in Washington DC.
One rate will be 15 percent and another 10 or 8 percent, Muhith said, adding that the rates will be finalised next year.
The new VAT law, which prescribed a uniform rate of 15 percent for almost all goods and services available in Bangladesh, was scheduled to come into effect from July 1.
But due to opposition from various quarters, mainly the business community, its implementation has been deferred for two years.
Implementing the new VAT law by fiscal 2017-18 was one of the conditions for the IMF’s $1 billion Extended Credit Facility.
“I told them that the prime minister has decided to defer the implementation of the VAT law. Since the election is coming, now is not a good time for implementation.”
But in 2020, the new VAT law will be implemented by the next government.
“In the primary stage, we were committed to implementing one rate and that would be 15 percent. But now, there are a few items on which VAT is 15 percent but the rates are 3 percent, 4 percent, 5 percent, 6 percent and 7.5 percent for most of the products,” Muhith said.
The latest development comes days after businesses and economists suggested that the revenue authority engage local research firms to carry out an independent study on the new VAT law’s impact on various trade and industrial sectors when it comes into effect.
“We want an independent study to know the impact. It should not favour the business community. It should not favour non-compliant firms,” said Md Shafiul Islam Mohiuddin, president of the Federation of Bangladesh Chambers of Commerce and Industry, at a meeting recently.