Also seeks VAT waiver on utilities, petroleum products

The Consumers Association of Bangladesh (CAB) has proposed the government should exempt electricity, gas, water and petroleum products such as diesel and kerosene from value added tax (VAT) and withdraw excise duty on bank balance for protecting the interests of consumers.

Consumers want assurance that the prices of those products would not go up after implementation of the new VAT act, the CAB leaders said.

"We want relief, not prosperity. After placing the proposed budget, both consumers and businesses are in discomfort," CAB president Golam Rahman said on Thursday.

CAB apprehends that the prices of products would go up as 15 per cent uniform VAT rate would be imposed on all products, he told a workshop on benefits under new VAT and Supplementary Duty Act-2012 organised by the National Board of Revenue (NBR) at the city's Institution of Diploma Engineers Bangladesh (IDEB).

CAB hopes that the government would bring necessary amendments to the proposed budget and present a public-friendly budget, he added.

The real value of bank deposits has declined if bank interest rate of 4.0-5.0 per cent and inflation rate of 5.0-6.0 per cent are taken into consideration, the CAB president said.

Depositors will be affected if they are forced to pay higher excise duty, he said. "We have doubt where 15 per cent VAT is properly deposited in the public exchequer or not."

The government has exempted essential commodities from VAT but included a number of unnecessary products in the list of VAT-exempted products, he said.

Mr Rahman added: "With the inflated numbers, the government's credibility and acceptance is under question."

The proposed budget raised SD on tea, toothpaste, soap and some other products that are also essential for daily life, he said.

Also, VAT on cement, rod and other construction materials increased in the proposed budget that would push up the cost of building residences, he said.

The government proposed increasing tax on a kind of tobacco products which should be raised for all kinds of tobacco products, considering its health hazards, he added.

He also said the government should focus on direct tax collection instead of collection of indirect tax.

The CAB president urged the government to supply at least 50,000 to 0.1 million Electronic Cash Register (ECR) machines to the sales centres to ensure proper collection of VAT.

On excise duty, Mr Rahman said it is not the right way to impose heavy tax burden on bank depositors while the government should take stern action against the vested quarters and board of directors who are looting the banks.

He said the government should lay emphasis on large power projects instead of rental power plants.

DR M Shamsul Alam, adviser of CAB, said the wholesale rate of electricity is Tk 6 to Tk 6.5 per unit including subsidy and the government is imposing VAT on subsidy.

"Exempt VAT on gas, electricity, water and energy products for expediting the national growth," he said, adding that the new VAT law may result in increase in the prices of products as the government has less control on businesses.

How the VAT collection rule would be made effective in a market where the prices of products and services depend on bargaining, he added.

Dr Alam said the complex VAT law should be made clear to the businesses.

"On electricity, consumers are paying 5.0 per cent VAT which has been increased to 15 per cent in the proposed budget. The consumers will have to bear the brunt of that hike," he added.

He said gas of international oil companies is exempted from SD and VAT but the Bangladesh Energy Regulatory Commission (BERC) fixes the gas price by adding tax including local and IOC's gas.

VAT policy member Jahangir Hossain said gas produced by IOCs is exempt from VAT and SD to reduce the amount of subsidy as the government purchases gas at higher rate than that of selling price.

He said electricity price would not be increased if the power division claims rebate under the new VAT law.

A team of the NBR is working on the electricity price to ensure a win-win situation for both consumers and the government, he added.

Industrial units have to reduce the system loss to boost up its efficiency and productivity, he added.

About excise duty on bank accounts, he said the duty would be deducted once a year if the balance exceeds Tk 0.01 million any time round the year.

Mr Hossain ruled out the possibility of increasing the prices of products except MS rod. NBR chairman Md Nojibur Rahman said the government offered a widespread VAT exemption on the products which are under 5.0 per cent and 12 per cent VAT net in neighbouring country India.

Exemption has been given considering four issues including protection of local industries, boosting export, helping industries competitive in international market and employment generation.

The list of essential products that are exempt from VAT should be counted rather than focusing on the number of goods, he added.

VAT member and project director of Vat Online Project (VOP) Rezaul Hassan said the SD protection for local industries, essential consumers' goods, zero-duty facility for some products at import stage has been kept unchanged in the proposed budget.

"There is misleading information that VAT at a rate of 15 per cent would be imposed on all sectors. With the VAT refund on inputs, the rate would be reduced to 3.0 per cent," he added.

The government will consider if there is any products or services left out from VAT exemption causing public sufferings, he said.