Confusion over ‘withdrawal’ of VAT on import of oil, sugar, chickpeas

Confusion has been created over the finance minister AHM Kamal’s announcement of withdrawal of VAT (Value Added Tax) on import of edible oil, sugar and chickpesa on Thursday.

The reason of the confusion is there was no duty tax on the import of chickpeas from beforehand, while no new exemption on sugar will be made, said National Board of Revenue (NBR) sources.

Withdrawal of VAT on the import of edible oil is supposed to help decrease its price but the oil companies say the expenses might increase because of the way the finance minister announced the VAT withdrawal.

Following a meeting with the Cabinet Committee on Public Purchase, finance minister AHM Kamal on Thursday told newspersons, “I’ve withdrawn VAT to keep prices of essentials at a bearable level. People will be provided with daily essentials at a cheap price through TCB (Trading Corporation of Bangladesh). Ten million families will get the commodities at an affordable price. The government is doing what it can. VAT on edible oil, sugar and chickpeas is being withdrawn.”

Meanwhile, TCB will procure a huge quantity of sugar, chickpeas, lentils and edible oil from local suppliers to sell those to people during the holy month of Ramadan. The Cabinet Committee on Public Purchase in a meeting on Thursday approved three separate proposals, placed by the Commerce ministry in this regard.

TCB is being strengthened to keep the situation under control, the finance minister said, adding “No syndicate will get the chance to raise prices of essentials if those are distributed to the market through the TCB.”

Analysis of customs tariff schedule of NBR reveal there is a 15 per cent VAT for chickpeas imported in a 2.5kg packet or can along with 5 per cent advance income tax and 5 per cent advance tax. As a result, the total tax is 25 per cent. The businesspersons, however, import loose chickpeas. This does not have any duty or tax.

Wishing not to be named, a businessman told Prothom Alo, he never has seen any duty, tax on import of chickpeas. Importing lentils is also duty-free.

There was 30 per cent protective duty on unrefined sugar. That was decreased to 20 per cent in October last year. The date of this exemption expired on 28 February. But the NBR has increased the exemption for another two and a half months.

Currently, specific duty on per tonne of sugar is Tk 3,000 along with 15 per cent VAT, 20 per cent protective duty and 5 per cent advance tax.

NBR sources said the VAT will be withdrawn for importing edible oil only. Sugar is included in that.

People concerned said the sugar that would be sold in the country has already been imported. The amount of imported unrefined sugar in January-February was 488,000 tonnes which is 260,000 tonnes more than the same time in the previous year.

The finance minister on Thursday said 15 per cent VAT is being withdrawn at the production level and 5 per cent at the consumer level. But the businesspersons said they will have to spend more due to withdrawal of VAT at the production and distribution level. They said they will have to pay VAT at the import level and they will no longer have the benefit to take exemption at the production and distribution level.

Speaking to Prothom Alo, Md Shafiul Ather, director (finance & operations) of TK Group, the country’s leading edible oil importing company, said, “As we haven’t got the notification as yet, we don’t know what’s happening. But the withdrawal of VAT at the production and distribution level will not be helpful. Rather, expenses will increase.”

Currently the VAT stands at Tk 26-30 per litre at three stages, he added.

After the announcement of the finance minister the proposal to decrease VAT was sent to the law ministry on Thursday for vetting. As a result, issuing a notification is now a matter. NBR could issue the notification in this regard on Sunday or Monday. The decision will remain effective until 30 June.

Biswajit Saha, director of City Group, another leading edible oil importing company in Bangladesh, said, “We don’t know how much price will be decreased until the issuing of the notification. The Trade and Tariff Commission will calculate this. Only then we can tell.”

Hoping the price would come down corresponding with the VAT withdrawal, Rafiqul Islam, teacher of a private college said, “This is good news. Hopefully this would not be that the government does not take VAT from the businessmen but the price still does not come down.”