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Bid To Curb Inflation

Govt to halve tax at source on 28 essentials, food grains

Published : Sunday, 2 June, 2024 at 12:00 AM  Count : 309
The government is going to halve the tax at source on supply of 28 essential commodities and food grains to 1 per cent to provide some relief to the consumers suffering from the prevailing high inflation.

However, the National Board of Revenue (NBR) has proposed a standard VAT rate of 15 per cent for many goods and services in the upcoming fiscal year (FY) 2024-25 budget.

Finance Ministry officials said that rice, wheat, potatoes, onions, garlic, peas, chickpeas, lentils, ginger, turmeric, dry chilies, pulses, maize, flour, salt, edible oil, sugar, pepper, cardamom, cinnamon, cloves.

They said that 1 per cent tax will be deducted at source instead of the current 2 per cent on the supply of dates, bay leaves, jute, cotton, yarn and all kinds of fruits.

On the other hand, it plans to reduce the total tax rate on the import of packaged milk powder weighing up to 2.5 kg from 89.32 per cent to 58.60 per cent. Currently, the total tax rate for bulk importers of milk powder is 37 per cent.

Besides, the government is planning to calculate advance income tax at the import level for bulk importers of powdered milk.

While there is a proposal to apply this VAT rate uniformly across all products and services, the Prime Minister has advised a phased implementation. This would result in a 15 per cent VAT rate from production to the consumer level, which could increase consumer prices.

Currently, the NBR collects VAT at rates of 2, 3, 5, 7.5, 10, and 15 per cent on various products and services.

 Plans are in place to phase out VAT exemptions in some sectors, moving towards a uniform VAT rate, according to Ministry of Finance sources.

The Prime Minister has given a positive nod to a proposal to increase the supplementary duty on mobile phone calls to boost revenue collection.

Currently, consumers can talk for minutes worth Tk 73 when they recharge their mobile by Tk 100, with the rest deducted as VAT and supplementary duties. If the supplementary duty is increased by 5 percent, consumers will be able to talk for minutes worth Tk 69.35 out of Tk 100.

Finance Ministry officials said that the National Board of Revenue (NBR) has taken these steps as per Prime Minister Sheikh Hasinas directives to reduce pressure on consumers in the upcoming budget.

Finance Minister Abul Hassan Mahmood Ali will propose the budget in the national parliament on June 6.

Earlier on May 14, the Prime Minister had directed not to increase taxes on food, agri-related items and fertilizers in the upcoming budget in view of high food inflation in the country.

According to NBR sources, NBRs fiscal policy officers met the Prime Minister to inform about the proposed policy changes.

Sources present in the meeting with the Prime Minister said that the Prime Minister has directed the NBR not to increase any duty or tax on food and food-related products as food inflation is already high.

In this regard, former president of Dhaka Chamber of Commerce and Industry Abul Kashem Khan said, "We have been opposing advance income tax for a long time. But any move to reduce taxes is always welcome. If the government reduces any tax to 1 percent, it will be very helpful for local businesses and traders."

The target of revenue collection in the upcoming budget is Tk 531,900 crore. It is 9.4 per cent of total GDP.

The target of revenue collection in the next budget is increasing to about Tk 32,000 crore. So the overall deficit (excluding grants) could be Tk 265,000 crore.

According to the information provided by National Board of Revenue (NBR), the revised target of revenue collection for the current financial year is Tk 410,000 crore. Out of this, the target for July-March is Tk 281,745 crore, against which the income has been Tk 259,866 crore. Accordingly, the target has been achieved 92.23 per cent.

The revenue in the first nine months of the current fiscal year has increased by 15.23 per cent compared to the same period last year. Out of this, there has been an increase of 10.21 per cent in customs, 15.88 per cent in VAT and 19.20 per cent in income tax.

Sources in the Ministry of Finance said that the value added tax or VAT net will be expanded in Dhaka and Chattogram to collect a large amount of revenue in the next budget. Contracts have been made with private organizations especially for setting up EFD machines.

Besides, new taxpayers will also be identified. The National Board of Revenue (NBR) plans to work in coordination with BRTA, City Corporation, DPDC to bring new tax payers under the net. Besides, e-challan is being made mandatory for payment of tax of Tk 20 lakh or above.

Earlier it was mandatory for Tk 50 lakhs. Besides, the government is planning to increase revenue management efficiency, increase collection and improve service quality through the implementation of Income Tax Act-2023.

The size of the main budget for the next fiscal year 2024-25 likely at Tk 796,900 crore. Which is said to be 4.62 per cent more than the current fiscal year 2023-2024 whose current budget is Tk 7,61,785-crore national budget for 2023-24 fiscal year.

At the same time, the possible target of growth is 6.5 per cent. Achieving growth is less important than focusing on controlling inflation.



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