Package VAT may be cut

The government may reduce the rate of package or fixed VAT to lessen the pressure on small and medium shops, officials said yesterday.

“We are working on the issue. But the rate cut depends on the decision of the government high-ups,” said a senior official of the National Board of Revenue.

The revenue authority has taken the initiative amid demand from businesses after the package VAT was doubled to Tk 28,000 a year for shops in Dhaka and Chittagong city corporations this fiscal year.

For shops in other city corporations too, the package VAT rate was doubled to Tk 20,000. The NBR also hiked the fixed amount of VAT for shops in municipalities.

Traders said the new amount is too high for small shops to bear.

To press home their demands, early this month a large number of traders kept the shutters of their stores down in response to a call by Byabosayee Oikya Forum, a platform of retailers and wholesalers.

The forum halted their demonstration based on assurance from the NBR that there would be something positive for them.

Representatives of the forum earlier said shop operators would not object if the package VAT was raised 20 percent from Tk 14,000 in fiscal 2015-16.

Officials said the government gets less than Tk 20 crore a year from the package or fixed VAT collected from thousands of small and medium businesses including stores and restaurants.

Many large shops and wholesalers also prefer to be in the fixed amount of VAT payment system despite logging in quite a handsome amount of turnover, officials said.

Currently, shops with an annual turnover between Tk 30 lakh and Tk 80 lakh are supposed to pay tax equivalent to 3 percent of their sales turnover. 

But many large shops tend to pay package VAT instead, due to which they do not need to show their annual turnover to the revenue authority, said a senior official of the NBR earlier.

Officials said the government plans to scrap the package VAT system entirely in the new law, which would be in force from July 1 next year because of collection of poor amount of revenue against high administrative cost of about Tk 60 crore a year.

Under the new law, shops with an annual turnover of up to Tk 30 lakh would be exempt from VAT payment. A turnover tax would be applicable for turnovers of Tk 30 lakh to Tk 80 lakh a year.