VAT collection rises by 21pc in first 5 months of FY24

The National Board of Revenue (NBR) has reported a 21 percent year-on-year rise in VAT collection from large companies in the first five months of fiscal 2023-24, mainly based on price hike of gas and tariff increase in tobacco resulting in higher sales prices.  

Tax officials said NBRs Large Taxpayers Unit (LTU-VAT) collected around Tk26,000 crore in the first five months of FY24 -- an increase of more than Tk5,000 crore. Gas and tobacco sector alone contributed TK3,000 crore.

According to LTU data, 110 large companies paid Tk26,000 crore in VAT in July-November period of FY24, which is more than half of the total VAT collected. Of the amount, more than half - about Tk13,000 crore - came from the British American Tobacco Bangladesh Limited alone.
VAT collection from gas sector during this period increased by 105 percent on the back of gas price hike by up to 187 percent in February 2023.

Md Abdul Rashid Mia, additional commissioner and spokesperson of LTU-VAT, said, "There has been a big jump in collection due to increased gas prices. Besides, tariff level on cigarettes has been increased in the last budget. Cigarette sales have fallen in five months but price adjustment at various levels resulted in revenue growth,"

Humayun Kabir Khan, deputy general manager of Titas Gas said "In last February, the price of gas was hiked up to three times. This is the main reason behind the huge growth in VAT collection on gas sector."

VAT collection from mobile phone sector saw a 22 percent year-on-year growth to Tk805 crore during the five-month period.

Representatives of the phone companies say in some cases prices have increased due to changes in their products rates (talk time or internet packages). VAT payment increased mainly for clearing of pending dues, they say.

A top official of a mobile phone company, who preferred not to be named, said, "mobile phone business fell significantly in the first half of the fiscal year. But the 22 percent VAT growth from the sector happened mainly due to resolution of some disputes."

He said people have been experiencing high inflation for the past year which hovered around 10 percent in August, the highest in last 12 years and it was still above 9 percent in November. Experts say NBR generated additional revenue as the government hiked gas prices in addition to tariff rise on cigarettes.

SM Nazer Hossain, vice president of Consumer Association of Bangladesh (CAB), said "Any increase in indirect tax or tariff value is passed on by traders to consumers. VAT collection increase from sectors like gas indicates additional pressure on consumers facing high inflation."

He also said, "We have been campaigning for a long time to reduce indirect taxes. But the government is not paying heed to the demand; rather it is going in the opposite direction."

In the last national budget, the government increased tariff value at some other levels including the lower tier cigarettes.

Besides, supplementary duty was increased, which triggered VAT collection by 14 percent despite a decrease in overall sales.

Among top 10 VAT paying sectors, VAT from beverage and soap declined during the reported period. The growth in revenue from cement sector was however small.