Package VAT may be reduced

The government may finally reduce the amount of package VAT (value-added tax) for small businesses in the current fiscal in the face of persistent demand from the trade bodies.

In the budget for the current fiscal year (FY), the government has increased the package VAT twofold, prompting the traders and trade bodies to raise their demand for cuts in the tax.

Sources familiar with the latest development said the National Board of Revenue (NBR) received the green signal to go for reduction in the amount of package VAT.

However, the revenue authority is yet to decide the extent of cut in the amount of package VAT.

They said the reduced package VAT would be decided as per direction of the Finance Minister.

The move came after a section of traders, mainly businessmen in the city`s old Dhaka, kept shutters down this month to press their four-point demand, principally VAT reduction.

Initially, they had set November 20, 2016 as the deadline for the authorities to meet their demand. Later, they agreed to wait until November 30 following assurances from the NBR of looking into their demands.

The traders` other demands include continuation of package VAT in the upcoming FY, waiver of VAT on bread and plastic slipper up to a certain limit.

Tax officials said small traders having turnover up to Tk 3.0 million will be exempted from payment of VAT from July 01, 2017 with the implementation of the new VAT law.

"There is no necessity of continuation of package VAT as the small traders will not have to pay VAT," said one VAT official.

They think the NBR won`t lose any major amount of revenue by exempting the small businesses. The VAT wing receives some Tk 150 to 180 million a year as package VAT.

Under the package VAT system that is poised to be abolished from next fiscal under a new law, small shops can pay a lump-sum amount of VAT annually irrespective of their business volumes.

Business bodies in Dhaka and Chittagong city corporation areas with value addition worth Tk 15,555 or having annual sales of 0.7 million (monthly Tk 58,333) are entitled to enjoy package VAT.

However, many big shops, too, are enjoying the system meant for the minnows instead of paying VAT at regular rate.

Officials said the agitation started after some of the VAT commissionerates, including Dhaka East and South, launched a crackdown to find out big shops that are enjoying package system of paying the tax.