VAT increase won’t affect price of essentials: Finance adviser

Finance adviser Salehuddin Ahmed has said increase of Value Added Tax (VAT) on some commodities and services will not lead to price hike of essentials.

“Duty of all essential commodities has been slashed to zero. You will see that impact,” Salehuddin told journalists at secretariat today.  

The government on Wednesday in principal decided that a 15 per cent VAT will be imposed on 43 types of commodities and services. The proposal to raise VAT rates was discussed at a meeting of advisory council at the chief advisor's office. In addition, initiatives have been taken to increase supplementary and excise duties on some commodities and services.

The adviser made the remark while journalists asked him if this government initiative to increase VAT will lead to increase of prices of essentials and the cost of living. The adviser made the comment after emerging from the meeting of the Cabinet Committee on Government Purchases today.

In response to a question, the finance advisor said, “Our main weight indicators of inflation are rice and pulses. The commodities on which we are increasing taxes have very insignificant role in increasing inflation.”

Salehuddin Ahmed said VAT is being increased for restaurants above three stars, not for general restaurants.

Regarding the initiative to increase the duty on air fares, the advisor said that excise duty on domestic flights may be increased from Tk 500 to Tk 700, which might not be a big deal for those travel by domestic flights.

“People now fly domestic flights fairly regularly. I don't think they can't pay additional Tk 200. This is marginal,” said the adviser.

The adviser further added that no countries of the world, even Nepal and Bhutan, have so little amount of tax.

Salehuddin also claimed that the decision has not been taken to meet the conditions of the International Monetary Fund (IMF), but considering all factors.