B Mirror Report
The interim government is set to announce the budget for the upcoming fiscal year tomorrow, Monday. This budget includes a doubling of VAT on certain goods and services. In some instances, VAT is being raised, while in others, it is being lowered. The VAT exemption for various goods is being reduced at the local production level. Conversely, to help decrease the trade deficit with the United States, VAT will be exempted at the LNG import stage. This information has been disclosed by the National Board of Revenue (NBR).
Prices for household products made from plastic may rise due to this year’s budget. The government plans to increase VAT from 7.5 percent to 15 percent at the production level for all types of tableware, kitchenware, household items, hygienic products, toilet items made from plastic, and similar products. Likewise, VAT is set to rise from 7.5 percent to 15 percent at the production stage for self-copy paper, duplex board, or coated paper.
The cost of constructing a house will also see an increase. The specific tax on the production of rods is being raised by approximately 20 percent. VAT on services provided by construction companies is increasing from 7.5 percent to 10 percent. Additionally, VAT on blades, spikes, anchors, screws, joints, nuts, bolts, electric line hardware, and pole fittings, including various types of screws, joints, nuts, bolts, electric line hardware, and pole fittings, is being raised from 5 percent to 7.5 percent. VAT on commissions for online product sales may triple from 5 percent to 15 percent. Furthermore, the specific tax for cotton yarn and a blend of artificial fibers and other fibers at the production stage may be fixed at 5 taka per kg instead of the previous 3 taka.
The current VAT exemption facility for local production of washing machines, microwave ovens and electric ovens, blenders, juicers, mixers, grinders, electric kettles, irons, rice cookers, multi-cookers and pressure cookers, and four-stroke three-wheelers may be reduced to June 30, 2030. While maintaining the existing exemption facility for general motor cars and motor vehicles, hybrid and electric vehicles, including general and ICU ambulances, are being conditionally exempted from VAT until June 30, 2030. There is a proposal to reduce the VAT exemption facility for raw materials for soap and shampoo and its local production to June 30, 2027.
The complete VAT on the production phase of lithium and graphene batteries will be exempt until June 30, 2027, followed by an additional VAT of 5 percent from July 1, 2028, to June 30, 2030. Furthermore, a 5 percent additional VAT may be waived for the local production of e-bikes until June 30, 2030. Previously, there was a VAT exemption for the local manufacturing of refrigerators, freezers, air conditioners, and their compressors, as well as polypropylene staple fiber and idle start-stop batteries. This exemption will not be available in the forthcoming budget. Nevertheless, the importation of certain materials necessary for producing refrigerators, freezers, air conditioners, and their compressors will be exempt from supplementary duty until June 30, 2028.
The new budget brings positive news for small depositors and borrowers. The first tier of excise duty on bank balances is undergoing changes. At present, there is no excise duty on bank balances up to 1 lakh taka. In the upcoming budget, the government plans to exempt excise duty on bank balances up to 3 lakh taka. This duty applies to any balance, whether it is a deposit or a loan in a bank account.
Advance tax is being reduced at the production level while increasing at the commercial level. For production, the advance tax on the import of industrial raw materials is being lowered from 3 percent to 2 percent. However, it is proposed to raise it from 5 percent to 7.5 percent for commercial importers. If the value added at the local level by a commercial importer does not exceed 50 percent, a provision is being established to avoid re-imposing VAT after the final settlement at the business level. Additionally, it has been proposed to adjust the penalty for taking illegal discounts from a range of 50 to 100 percent down to 30 to 50 percent.
For commercial importers importing cigarette paper, the supplementary duty rate will rise from 150 percent to 300 percent. Additionally, a new supplementary duty of 10 percent is being introduced for OTT (over-the-top) platform services, which are being defined. Furthermore, there is a proposal to lower the supplementary duty on all varieties of ice cream from 10 percent to 5 percent.
