Taxation proposals made in Bangladesh Budget 2020-21

Chapter Six: Revenue Collection Activities
Madam Speaker
157. Till now I have discussed the expenditures of the Government. Now we shall focus on the sources of the expenditures. The major share of the expenditures will come from internal resources which will be collected by the National Board of Revenue (NBR). Internal revenue collection target is set on the basis of the size of the expenditure budget. There are mainly two sources of revenue: NBR-generated tax and non-NBR tax. Majority of our revenue, 85 percent to be precise, is collected by NBR. But it is also true that in order to meet the basic needs of the people of the country, enhance business activity and create employment and establish an equitable and just society, various types of tax exemptions or tax benefits have been given in Income tax, Customs and VAT. This exemption is in addition to different welfare expenditures, incentives or financial benefits of the government -which are often outside the purview of the revenue account. We have proposed to continue and expand similar facilities this year.
Madam Speaker
158. Revenue growth was 8.26 percent in FY 2018-19. Although revenue collection for FY 2019-20 is yet to finish, revenue growth is expected to slow down somewhat due to the COVID-19 outbreak. The COVID-19 outbreak will not be diminished easily and many voice doubt that the country’s economy will return to normalcy in the next fiscal year. They apprehend that the impact of coronavirus will slow the economy down, and GDP growth will not be at the desired level. Keeping these factors in mind, we have arranged the revenue policy this year. In order to maintain the steady pace of economic and GDP
76growth as in previous years, in addition to revenue collection, various types of proposals are placed in this budget for gaining momentum in trade and commerce, creation of employment and protection of public health.
Madam Speaker
159. We have taken many reform initiatives for both direct and indirect taxes to gain the confidence of respected taxpayers, businessmen and, above all, the citizens of the country. Initiatives have been taken to make the Income tax, VAT and Customs departments fully automated and digital. In addition, the e-payment system has been introduced in the Income tax, VAT and Customs departments to facilitate tax payment.
160. Work is underway to modernise and update the Income Tax Ordinance by introducing the new Income Tax Act. To increase the number of taxpayers, the Income Tax Department is conducting regular survey activities and has already identified 5 lakh new taxpayers this year. With the implementation of the BITAX project, taxpayers are now able to file income tax returns online. Travellers are now able to pay travel tax online through mobile apps. As a result, the tax payment process has become easier than before. Specific plans to modernise the tax department and make tax management more investment and business friendly are mentioned in detail in Chapter Seven of the budget speech.
Madam Speaker
161. We are implementing the VAT Online project and establishing an online IT-based VAT system to ensure a more efficient collection of VAT. As a result, businessmen will be able to pay VAT from their
77home. Measures are being taken to install Electronic Fiscal Devices (EFD) in all business establishments to make VAT collection easy, transparent and hassle free.
162. Various activities have been taken to modernise the Customs service. The Customs Modernisation Strategic Action Plan 2019-2022 has been adopted to facilitate trade and commerce in the country. Modern scanners are being set up at customs ports and customs stations. The National Single Window (NSW) project has been taken up to connect all stakeholders in a single platform. It will provide the facilities of One Stop Service for import and export. Full implementation of the modern and technology-based NSW project will speed up trade and reduce business operating costs. This will be an important step in the implementation of cross-border paperless trade. With the introduction of the Advance Ruling program, importers or new entrepreneurs can now be certain of the H.S. Codes and Rules of Origin of their products before importing them. The Authorized Economic Operator (AEO) system has been introduced to ensure faster delivery of goods, enabling traders to avail the Fast Track facility. In addition, IT-based risk management and post-clearance audit activities have been undertaken. This will speed up the delivery of goods for all but risky persons or organisations.
Madam Speaker
163. We have also taken various measures to increase the capacity of revenue administration. Training Academies under the NBR are to be modernised. In VAT administration, we are creating Training of Trainers (TOT)-based trainers from among the officers. Emphasis is being laid on sustainable development in enhancing the internal capacity of revenue collection. Expansion activities of the revenue administration are under consideration to improve the quality of services and increase the tax coverage. It is expected that these technology-based timely activities will encourage people to pay taxes, and they will feel pride in paying taxes which in turn will enhance the revenue flow in the country.
Chapter Seven
Income Tax, Value Added Tax and Import-Export Duty
Direct Tax: Income Tax
Madam Speaker
164. Direct tax or income tax is one of the major sources of internal revenue collection. Currently, income tax contributes nearly 35 percent of the total revenue collected by the NBR. Average growth in income tax collection has been above 15 percent in recent years. Analyses and review of data from different countries reveals a growing tendency towards income inequality among the citizens, which is a by-product of economic growth. Tapping adequate revenue to finance the overall development of the country, ensuring macro-economic stability, maintaining discipline in the financial sector, and establishing a welfare state having redistribution of wealth, social justice, equity and reduction of income inequality are some of the key objectives behind collecting income tax. The great strides made by our government in developing various socio-economic indicators of the country over the last twelve years received global appreciation as a role model. Economic growth and rise in per capita income in the past twelve years have made a large section of our population capable of paying income tax, which in turn opened up a huge potential and opportunity before us to significantly increase revenue collection. We need to make our income tax system more robust and dynamic so that the benefits of progress and development do not remain confined only to the fortunate few and can be shared by every citizen in the country, income inequality as a corollary to economic growth does not rise, and, above all, social justice, one of the key drivers behind the War of Independence, is ensured, and a society based on equity and welfare is built. As activities related to tax are heavily information-intensive, the unprecedented advancement taking place in the field of information technology in recent times has brought immense opportunities for us for augmenting tax collection.
Madam Speaker
165. Globalization and extraordinary development and evolution in information technology are contributing to the fast-changing nature and context of investment, business models and economic transactions. Economic activities these days are increasingly going cross-border with the widespread adoption of virtual economy due to digital access to information. Against this backdrop, issues relating to international taxes are increasingly becoming relevant and important. Now we do not have any alternative but to tap required internal resources to successfully implement Vision 2021 and elevate into an upper middle income country. Successful implementation of Sustainable Development Goals by 2030 also calls for gearing up the collection of income tax. As such, considering the present state of our taxation system, we need to build a modern and ICT-backed taxation system alongside reforming and revamping the income tax department at the earliest. For this, measures need to be taken to ensure the most efficient use of information technology in all the activities related to taxation such as filing of income tax returns, processing of returns, assessment of total income, computation of taxes and payment of taxes. Moreover, all activities related to TDS (tax deducted at source) need to be brought under an automated system. Necessary steps also need to be taken to facilitate capacity-building of the Income Tax Department on issues of auditing and international taxes.
Madam Speaker
166. We have been providing tax exemptions for a long time to facilitate the expansion of the country’s trade and investment, generation of employment and promotion of exports. Currently, many important sectors are enjoying exemption from payment of taxes and many sectors are paying income tax at a much reduced rate. Despite narrowing our tax-base, this is also creating scopes for employment and investment.
Madam Speaker
167. I will now present to this august House some important proposals related to Income Tax for FY 2020-21:
168. The tax-free threshold of income, tax rates and tax slabs for taxpayers other than companies and local authorities, especially individual taxpayers, have remained unchanged since FY 2015-16. The unchanged status of the tax-exempted income threshold on the one hand and the loss of real income due to inflation on the other have created a feeling of discomfort among the genuine and valued taxpayers with regard to payment of taxes. Also, our valued taxpayers have been financially affected due to the global outbreak of the COVID-19 pandemic. Considering these factors, and also as a gift of the ‘Mujib Borsho’, I propose to increase the tax-free income threshold and reduce the tax rate applicable for the taxpayers other than companies and local authorities, especially the individual taxpayers. This reduction of tax burden will hopefully add some comfort to the lives of the individual taxpayers, and will also make them feel encouraged to pay taxes regularly. I, therefore, propose to increase the tax-free income threshold of male taxpayers from Tk. 2 lakh 50 thousand to Tk. 3 lakh and the tax-free income threshold of female taxpayers and taxpayers above 65 years of age from Tk. 3 lakh to Tk. 3 lakh and 50 thousand respectively. At the same time, I propose to reduce the minimum tax rate for individuals from 10 percent to 5 percent, and the maximum tax rate for individuals from 30 percent to 25 percent. The following table presents the proposed tax-free income threshold, tax rates and tax slabs for all categories of individual taxpayers except companies and local authorities:

Total income Tax rate (A) On first Tk. 3,00,000/-Nil (B) On next Tk. 1,00,000/-5% (C) On next Tk. 3,00,000/-10% (D) On next Tk. 4,00,000/-15% (E) On next Tk. 5,00,000/-20% (F) On the balance of total income 25%
Madam Speaker
169. We have given the highest priority to the digital transformation of the Income Tax Department. I hope that we will be able to materialise this digital transformation in the quickest possible time, and as an outcome, the valued taxpayers will be able to pay taxes as well as file income tax returns online with utmost ease and comfort. To popularise the option of online payment of taxes and online submission of tax return among the taxpayers, I propose a tax rebate of Tk. 2 thousand to all the taxpayers who will file their income tax returns online for the first time. I hope this will highly encourage the taxpayers to submit their income tax returns online, which will, in turn, expedite the process of digital transformation of the Income Tax Department.
Madam Speaker
170. Except for banks, leasing and insurance companies, mobile
phone companies and cigarette manufacturers, tax rates for publicly traded companies and non-publicly traded companies have remained 25 percent and 35 percent respectively since FY 2014-15. To ease the tax burden of valued taxpayers at this critical time of the COVID-19 pandemic, I propose a 2.5 percent reduction in the tax rate of non-publicly traded companies to fix it at 32.5% from that of 35%. At present, the RMG factories having green building certification enjoy a special tax rate of 10 percent, whereas RMG factories without such certification pay taxes at a rate of 12 percent. The deadline of the SRO providing this special tax rate ends on 30thJune 2020, and I propose to extend the time-limit of the said SRO by another two years. I hope our taxpayers in the RMG sector will be greatly benefitted from this tax rate reduction.
Madam Speaker
171. To mitigate the crunch in working capital among business people in the context of the fallout of the coronavirus pandemic, and to rationalise the existing rate of taxes deducted at source, I propose to reduce the rate of tax to be deducted at source on certain items including some essential commodities. I propose to bring down the rate of tax deduction at source at the stage of local supply of essential commodities, such as rice, atta, potato, garlic, onion, etc. from 5 percent to 2 percent irrespective of the base price. The prevailing highest rate of tax deducted at source on supply of locally sourced M.S. scrap stands at 5 percent. Considering the financial capability of small businesses dealing in local supply of M.S. scrap as well as the issue of promoting the steel manufacturing industry, I propose to fix the rate of locally sourced M.S. scrap supply, irrespective of its base price, at 0.5 percent. Currently, the tax deducted at source (TDS) on the import of garlic and sugar is at a rate of 5 percent, which I propose to reduce to 2 percent. Also, with a view to promoting the poultry sector, I propose to reduce the rate of TDS on the import of raw material for poultry feed to 2 percent from the existing rate of 5 percent.
Madam Speaker
172. Exports of goods and services, including that of RMG, have faced a downturn due to the outbreak of the COVID-19 pandemic. I, therefore, propose to reduce the rate of withholding tax on export proceeds as a part of extending overall support to our export sector. The existing rate of collecting withholding tax on all sorts of export proceeds including that of RMG as stipulated in the Income Tax Ordinance is 1 percent that has further been reduced through an SRO, which continues to be in force till 30th June 2020. I propose to amend the Ordinance to fix the rate of withholding tax on all sorts of export proceeds including that of RMG at 0.5 percent instead of the existing rate of 1 percent.
Madam Speaker
173. We have taken steps to develop a strong bond market in the country to provide long-term financing. Flourishing of the bond market in the country will open up new scopes and opportunities for financing mega projects in public and private sectors. It is expected that this will reduce the cost of financing in the public and private sectors. Especially, the problem of balance sheet mismatch in the financial institutions arising out of short-term liability against long-term assets will be mitigated by this. Therefore, to make the bond market attractive to the investors by abolishing the existing provision of deduction of source tax upfront on interest and discount on bonds, I propose to introduce the provision of TDS at the time of payment of interest and discount on bonds. In addition, instead of the present provision of deducting withholding tax on the value of bond transactions, I propose the introduction of withholding tax deduction on the commission fixed by the Securities and Exchange Commission (SEC), the regulatory body for the capital market. I hope that these measures will increase transactions of bonds in the capital market and facilitate the flourishing of a strong bond market in the country.
Madam Speaker
174. Apart from revenue collection, the ongoing crisis caused by the coronavirus outbreak and the ensuing changed economic circumstances demand that the mainstream economy of the country be brought back to track and the people be given the opportunity to resume their economic activities. The possibility of an impending global economic recession also looms large. To face these challenges, we have to formulate and implement our financial policies for the upcoming fiscal year with utmost prudence and foresight. On the one hand, we need to generate more revenue to finance greater public spending to stimulate demand in the economy, and on the other hand, we need to provide impetus to the economic activities in the private sector. Extraordinary time demands extraordinary measures. Also, in some cases, lack of adequate knowledge on tax return submission may result in causing mismatch regarding proper declaration of assets owned by a taxpayer in his/her tax return. Under these circumstances, in order to provide an opportunity for the taxpayers to amend this mistake as well as to pave the way to increase the flow of money into the mainstream economy, I propose to insert two tax incentive sections in the Income Tax Ordinance. Firstly, regardless of the provisions of any other prevailing law of the land, individual taxpayers will be allowed to disclose any type of undisclosed house property including land, building, flat, and apartment between July 1, 2020, and June 30, 2021, on paying tax at a particular rate on per square meter of the said asset. Individual taxpayers will also be able to make any disclosure of undisclosed cash, bank deposits, savings certificates (Sanchayapatra), shares, bonds or any other securities between 1st July 2020 and 30th June 2021 on paying taxes at a rate of 10 percent on the value of the said declaration; and no authority including the income tax authority can raise any question on such declarations. Secondly, with a view to providing impetus to the stock market, a major hub of economic activity of the country, individual taxpayers can invest money in the capital market between 1st July 2020 and 30th June 2021 and show it in their tax returns on paying tax at a rate of 10 percent on the value of the investment subject to satisfying certain conditions including a lock-in period of three years, and no other authority including the income tax authority will raise any question in this regard. When comes into force, these provisions will increase the flow of money into the mainstream economy, generate employment and enhance collection of tax revenue.
Madam Speaker
175. There are widespread allegations of money laundering and tax evasion through under-invoicing, over-invoicing, and declaration of false investments. Our government has zero tolerance for such misdeeds. To put a rein on such tendencies, besides all other existing laws in this regard, I propose to insert a new section in the Income Tax Ordinance. According to the proposed provision, 50 percent tax will be levied on the proven amount of over-or under-invoicing, or on the proven amount of false declaration of investment. I hope that the proposed provisions will be highly effective in curbing money laundering and tax evasion caused through acts of under-invoicing, over-invoicing, and false declaration of investment.
Madam Speaker
176. I have already mentioned that the efficient administering of state affairs by our government during the last 12 years have resulted in achieving significant progress in different socio-economic indicators, as well as enhancing the per capita income. This has rendered many citizens of the country eligible for paying taxes. Due to lax in the existing provisions of the law, around 50 percent of the TIN (Taxpayer Identification Number) holders can now easily afford not to submit tax returns. Taking undue advantage of the situation, many eligible taxpayers are now avoiding submission of tax return and evading payment of taxes. Hence, except for a few logical exceptions, I propose to amend the Income Tax Ordinance to make submission of tax return mandatory for all TIN holders. When comes into force, this provision will potentially seal the scope of tax evasion, and significantly increase the number of return filers. Simplification of the tax return form is also necessary to smoothen the process of tax payment and tax return filing for all the taxpayers. In addition to the existing return forms, I, therefore, propose to introduce a new one-page-return-form to facilitate return submission by the marginal taxpayers. I hope the taxpayers will feel proud to be partners in the development of the country by paying taxes and easily submitting tax return using the proposed simplified return form.
Madam Speaker
177. In the run-up to achieving Vision 2041 and reaching the Sustainable Development Goals 2030, we must gear up revenue mobilisation and streamline the financial sector of the country. To this effect, we have no other choice but to establish a strong, functional and transparent Income Tax Department. In the beginning of my speech, I have underscored the necessity of an ITC-driven, reformed and restructured tax system in the country. The BITAX system of the tax department involving digital payment of taxes and online submission of tax returns will be modernised to give the digital transformation process of the department a real spearhead. Plans have been undertaken to give the tax department access to the database of different government, autonomous and private organisations through system integration and system interoperability. Special priority will be attached to issues related to the virtual economy, international taxation and auditing. We are also planning to increase the number of taxpayers by making the ongoing survey program more intensive and technology-supported. Measures have also been taken to establish a tax academy per excellence in the country to enhance professional skills of the taxmen. Formulation of a new business development friendly and modern Income Tax Act is also underway. Programs have also been taken to make the people compliant to tax matters. A policy will be drawn to recognize and reward the tax officers who will demonstrate extraordinary professional feat including identification of new taxpayers and mobilisation of revenue. I sincerely believe that legal changes arising out of the proposed amendments and implementation of these amendments will enhance the capacity of the tax department to discharge the responsibility vested on it. As a result, the pace of revenue mobilisation will be accelerated, and this will place a positive and effective role in achieving the overall development goals.
Value Added Tax (VAT)
Madam Speaker
178. Value Added Tax (VAT) is a modern tax system. It is the largest contributor to the NBR tax revenue. In order to establish a taxpayer-, revenue-and development-friendly VAT system, Value Added Tax and Supplementary Duty Act 2012 has been implemented in July 2019
after a series of discussion with trade bodies. It has speeded up the process of growth in trade and commerce. Continuous digitalisation of VAT related administrative activities are going on through the VAT Online Project. After completion of automation, it will be possible to accrue the full benefits of the Value Added Tax and Supplementary Duty Act 2012. I will now place the following proposals on VAT before the august House.
Madam Speaker
179. Various measures related to VAT have been formulated in such a way that these will speed up socio-economic development of the country in spite of economic losses caused by the Covid-19 pandemic. These proposals will also ensure business friendly environment and add dynamism in the enforcement of Value Added Tax and Supplementary Duty Act 2012.
180. To combat the fear of global recession as a fallout of the COVID-19 outbreak by making the VAT system modern and business-friendly, I propose the following measures to make the application of the existing law easier: a) I propose amendment, modification, deletion, and insertion of a few sections under Value Added Tax and Supplementary Duty Act 2012. These amendments will make this new law lucid, easy to understand and more taxpayer friendly; b) In line with changes in the law, some amendments related to the Value Added Tax and Supplementary Duty Rules 2016 have also been proposed; c) To encourage the local manufacturing industries, I propose to reduce Advance Tax (AT) on imported raw materials for manufacturing industries from existing 5 percent to 4 percent;
d)To make the law more taxpayer friendly, time limit for input tax credit has been proposed to extend up to 4 tax periods from existing 2 tax periods; e) I propose expansion of input tax credit facility for the benefit of the taxpayers. 80 percent of the expenditure incurred on transportation services will be considered as input credit; f)New provision has been proposed to avoid multiple withholding of VAT from the bill of sub-contractors who are engaged in various development projects as service providers; g)Amendment of the relevant section of the law has been proposed to make partial input tax credit effective and easier; h)During the period of an epidemic, pandemic or natural calamities, our taxpayers find difficulties while submitting returns. Delay in the submission of returns attracts provisions for fine and interest. To avoid fine and interest during these situations, relevant amendment of the law has been proposed to authorise the NBR to extend this time limit; i) There is a provision in the law for submission of return within 15 days completion of tax period. A new provision has been proposed to consider the next working day as the deadline for return submission if the 15th day becomes a public holiday; j)To speed up the adjudication of VAT related offences, I propose to insert the provision of summary adjudication in the law; k)I also propose amendments to make tax withholding system simple and consider the bill issued by Gas, Water, Electricity and Telephone authority as tax invoice; l)To reduce the tendency to lodge illogical cases in VAT related appeal forums the provision for deposit has been proposed to increase from 10 percent to20 percent of disputed tax while filing appeal before the Appellate Tribunal or Appeal Commissioner; m)For the purpose of trade facilitation, new rules have been proposed for disposal of unusable or expired raw materials, damaged products and waste or by-products; n)I propose to amend the provision related to tax determination to add appropriate adjudicating officer in addition to Commissioner only which will speed up administrative process; o) For the convenience of taxpayers, I propose to include local VAT circle office as a place for return submission; p)In order to make the collection process of arrear Excise Duty effective and efficient, amendment of relevant sections of the Excises and Salt Act, 1944has been proposed.
Madam Speaker
181. I am proposing to continue the existing VAT exemption facility in the cases of government’s priority and fast track projects, such as Rooppur Nuclear Power plant Project, High Tech Parks, Economic Zones and the Public-Private Partnership (PPP) projects. In addition, for the growth and development of domestic industry and export sector, I also propose to continue existing VAT and supplementary duty exemptions provided to the industries like automobiles, refrigerators, freezers, air conditioners, mobile industries, etc.
Madam Speaker
182. To promote our local industry, I now place a number of proposals before the august House for VAT exemption and reduction of VAT rates for FY 2020-21, which are as follows:
a) Local manufacturers currently enjoy VAT exemption on the manufacturing of mobile phone sets, and the current VAT rate for mobile phone set assembling is 5 percent. To encourage expansion of this sector, I propose to extend this facility for one more year; b)I propose total VAT exemption on locally produced mustard oil; c)To encourage the agricultural sector, I propose to give exemptions on agricultural machinery such as Power Ripper, Power Tiller operated Seeder, Combined Harvester, Rotary Tiller, etc. at the trading stage; d)To encourage the environment-friendly solar energy sector, I propose to provide VAT exemption on up to 60 AMP solar battery production for partner organisations of Infrastructure Development Company Ltd (IDCOL);e)To encourage the growth of local ICT sector, only 5 percent VAT rate on domestic production of Loaded PCB (Printed Circuit Board), Unloaded PCB and Router have been proposed; f)I propose to reduce the VAT rate to 5 percent from the existing 15 percent for manufacturing of potato flakes made of locally produced potatoes; g)Domestic production of maize is increasing rapidly. I propose to reduce VAT rate at 5 percent from the existing 15 percent for manufacturing maize starch; h) To encourage local textile industries, I propose to impose fixed VAT at the rate of 6 Taka per kg from the existing 5 percent ad valorem VAT on Polyester, Rayon and all other synthetic yarn, and at the rate of 3 Taka per kg from the existing 4 Taka per kg on all kinds of Cotton Yarn.
Madam Speaker
183. To support activities related to detection and prevention of coronavirus, I propose to exempt VAT on Test kits of Covid-19 on the import, manufacturing and trading stages. Alongside, exemption has also been proposed at the manufacturing and trading stages for locally manufactured Personal Protective Equipment (PPE) and Surgical Mask (including face mask) to protect health workers. Besides, I also propose to exempt VAT on COVID-19 medicines at the import, manufacturing and trading stages. I also propose to continue exemption on meditation service for one more year to keep mental health sound during the pandemic.
Madam Speaker
184. At present, there are 7.5 percent VAT at the factory stage and 5 percent VAT at the showroom stage of the furniture sector. To ensure similarity in both cases, I propose to increase VAT at the rate of 7.5 percent from the existing 5 percent on the showroom stage of furniture. I also propose to increase VAT at the rate of 10 percent from the existing 5 percent for air-conditioned launch services.
185. I propose to increase supplementary duty from 10 percent to 15 percent for all kinds of services rendered by BRTA for car and jeep registration and related services, from 25 percent to 30 percent for chartered aircraft and helicopters, from 10 percent to 15 percent on the services provided through mobile phone SIM/RIM card, and from 5 percent to 10 percent on locally manufactured cosmetics. The imposition of Supplementary duty at the rate of 10 percent has been proposed on Ceramic Sink, Basin, etc. at the manufacturing stage.
Madam Speaker
186. To reduce the consumption of tobacco products and maximise revenue collection from this sector, I place the following proposals:- a) Price Per 10-sticks lower slab cigarette to become Tk. 39/-and above and supplementary duty on it to be 57 percent; I propose to fix the price per 10-sticks middle slab cigarette at Tk. 63/-and above, that of high slab 10-sticks cigarette at Tk. 97/-and above and the price of premium slab 10-sticks cigarette at Tk. 128/-and above where supplementary duty will be 65 percent for all those three slabs. b)I propose to raise the price of handmade non-filter 25-sticks Bidi at Tk. 18 from existing Tk. 14/-, that of 12-sticks at Tk. 9/-from existing Tk. 6.72 and the price of 8-sticks at Tk. 6/-from existing Tk. 4.48/-where supplementary duty of this product will be unchanged at 30 percent. I also propose to fix the price of 20-sticks filter bidi at Tk. 19/-from existing 17/-and that of 10-sticks filter bidi at Tk. 10/-from existing Tk. 8.50 where supplementary duty will remain unchanged at 40 percent. c) I propose to fix the price of 10 gm of Jarda at Tk. 40/-and the price of 10 gm of Gul at Tk. 20/-. Supplementary duty of both the products is proposed to become 55%.
Madam Speaker
187. Excise duty is now collected on Bank Accounts and Airline tickets under the Excises and Salt Act, 1944. I propose to amend and insert certain sections to make this act easily implementable and time-befitting. Alongside, I propose to fix the excise duty rates on bank balance at the following rates: a)In cases where the balance exceeds Tk. 10 lakh but does not exceed Tk. 1 crore, Excise duty has been proposed to increase from Tk. 2,500/-to Tk. 3.000/-;b)In cases where the balance exceeds Tk. 1 crore but does not exceed Tk. 5 crore, Excise duty has been proposed to increase from Tk. 12,000/-to Tk. 15,000/-; and c)In cases where the balance exceeds Taka 5 crore, Excise duty has been proposed to increase from Tk. 25,000/-to Tk. 40,000/-;However, the applicable excise duty rates will remain unchanged in cases where the bank account balance does not exceed Tk. 10 lakh at any time during a year.
Madam Speaker
188. For effective enforcement of Value Added Tax and Supplementary Duty Act 2012, VAT registration process and Return submission activities have been automated under the VAT Online Project. In the meantime, almost 170 thousand persons have got VAT registration using the online platform. Moreover, taxpayers are submitting return through the online system which is getting popular every day. Almost 35 thousand taxpayers submit return through online system regularly. E-payment module has been prepared by the project which shall be implemented soon. Digitised VAT management system developed by the Project will reduce cost of doing business remarkably, and bring dynamism, transparency, and accountability in the VAT administration.
Madam Speaker
189. There are almost 4 million small and medium enterprises in Bangladesh. Although this sector holds an immense prospect for VAT revenue, the collection of VAT from this sector is very challenging. At
96present, only 3 percent of total VAT is collected from this sector manually. A few years back, the government thought of using the automated system in this sector for collecting VAT. After exploring ideas from different countries, Electronic Cash Register (ECR) was introduced for some selected services. But the ECR technology did not fulfill our expectations due to some technical shortcomings. The technology had been reviewed thoroughly to identify its limitations. Thereafter, the government has decided to introduce the latest technology named ‘Electronic Fiscal Device’ (EFD). A plan has been taken up to install 10 thousand EFD machines at the initial stage. Later on, 5 lakh machines will be installed throughout the country in phases. Due to some formalities of procurement, installation of EFDs in business units was delayed. Finally, it was planned to inaugurate the EFD installation in the last week of March 2020 to commemorate the Mujib Borsho. All the formalities were completed, but the installation was again delayed due to the outbreak of COVID-19 pandemic. We will do the installation on a priority basis once when the coronavirus situation subsides. We hope that we can distribute EFD to business units within this Mujib year. Keeping the goal of “EFD implementation, Mujib Borsho’s contribution” in our mind, we are going ahead with our plan to implement this. Import-Export Duty-Taxes
Madam Speaker
190. Measures have been taken to make the existing tariff structure more liberal and rational to foster the recovery of the domestic economy. Special attention has been given to ensure proper revenue collection with the aim of restructuring the economy affected by the outbreak of COVID-19. Taking into consideration of the proposals received from different stakeholders and agencies, I place the budget
97proposals on import duty and taxes for the fiscal year 2020-21 before this august House for the protection of local industry and trade and the interest of consumers.
Madam Speaker
191. Proposals regarding customs duty, regulatory duty, supplementary duty and Value Added Tax at the import stage have been placed by considering the following factors:•To take necessary steps to reconstruct the economy of the country which has been ravaged by the outbreak of COVID-19;•To create opportunities for investment, employment generation and save foreign exchange;•To provide incentives for export-oriented industries and their backward and forward linkages;•To flourish and develop the agriculture, health, leather, textile, fishery, livestock and ICT sectors;•To upgrade the ranking of Bangladesh in the Ease of Doing Business index;•To prevent smuggling, misdeclaration of goods and ensure proper use of bonded warehousing facilities; and To enhance internal revenue (VAT and income tax) collection and protect local industries by rationalizing duty rates.
Madam Speaker
192. I propose existing 6 slabs of Customs Duty (0%, 1%, 5%, 10%, 15%, and 25%), 3% Regulatory Duty on goods having highest import duty, and existing 12 slabs of Supplementary Duty (10%, 20%, 30%, 45%, 60%, 100%, 150%, 200%, 250%, 300%, 350%, and 500%) on
import stage to continue in FY 2020-21. Besides, existing 0 percent import duty will remain unchanged for importing essential commodities, fertilisers, seeds, lifesaving drugs and raw cotton along with raw materials for some industries.
193. I will now present sector-wise proposals on the basis of the above fundamental principles in details:
(A) Agriculture sector
Madam Speaker
194. Agriculture is a priority sector in Bangladesh. The zero rate is proposed to be unchanged for basic ingredients of the agriculture sector, especially fertilisers, seeds, insecticides, etc. I propose to continue and extend the tax incentives and exemptions on agricultural equipment and spare parts.
195. At present, farmers are cultivating plenty of onions in our country. But with the zero duty rate on imported onions, domestic onion farmers are weary of being deprived of fair market prices compared to production costs. This may discourage farmers from cultivating onions in future. Therefore, I propose a small rate of customs duty on onion import to ensure fair market price for onion farmers, encouraging onion cultivation and reducing dependency on imports.
196. Importation of edible salts (Sodium Chloride) has been restricted in our country for a long time. But, industrial salt (sodium sulphate/disodium sulfate) is importable. It has been noticed that there is a tendency to import edible salts by mis-declaring as industrial salts. Also, there are complaints of adulteration by mixing industrial salt with edible salt that is injurious to public health. The reason behind is that the price difference between industrial salt and edible salt is too high. As a result, marginal salt farmers and salt mills are being deprived of getting fair market price. Therefore, I propose to increase the existing duty rate on industrial salt (sodium sulfate/disodium sulfate) to protect the salt farmers by ensuring that they get fair market price, and to mitigate public health risks.
197. To ensure sustainable development in the Fish, Poultry and Dairy sector, I propose to continue the existing tax exemptions and extend such exemptions to two new raw materials (Soya bean oil cake and Soya protein concentrate). This will reduce the import cost of raw materials of poultry feed. Besides, I propose to increase the existing duty rate on the import of cuts and offal of chicken to provide protection to the local poultry sector. (Table-1 of Annex-B). (B) Industrial sector
Madam Speaker
198. Industrial sector will play a vital role in reconstructing the economy affected by the fallout of COVID-19.To boost industrial investment, ensure maximum utilization of production capacity of existing industries by rational protection, and make export-oriented industries more competitive through its diversified expansion, I propose following increases/decreases in the duty structure on different sub-sectors under the industrial sector (Table-2 of Annex-
B):1) Small and Medium Enterprises (SMEs):
Considering the development of small and medium enterprises, Honorable Prime Minister has declared Light Engineering as the ‘Product of the Year’ for 2020. Considering its importance, special measures have been taken to protect SMEs. In light with the recommendations of SME Foundation, I have proposed to reduce the tax rate on import of some of the raw materials used in the production of SME products. Duty and taxes on import of some products (e.g. nails, screws, small machinery parts, etc.) have been proposed to increase to protect SMEs. I also propose to increase the current duty rate on the import of honey in bulk to protect indigenous honey farmers.
2) Export Sector: Considering the justified proposals received from the RMG sector, I propose to reduce the existing duty rate on the import of certain products (such as RFID Tag, Industrial Racking System, Cutting Table, etc.) to promote export-oriented garments and textile industries. In addition, the existing provisions of bonded warehouse licensing rules will be rationalised to ensure proper utilisation of bond facilities.3)Footwear Industry: To diversify export by tapping the potential of the footwear industry, I propose to reduce the duty rate of three raw materials imported by this industry.4)Electronics Industry: To protect the domestic industry, I propose to expand the existing concessionary duty benefit on the import of raw materials by the refrigerator and air conditioner compressor manufacturing industry. 5) Shipbuilding Industry: To ensure expansion and protection of the domestic shipbuilding industry, I propose to withdraw the existing duty exemption on the importation of dredgers.6)Detergent Industry: I propose to decrease the existing rate of customs duty of Linear Alkyl Benzene Sulphuric Acid (LABSA), one of the basic raw materials of the detergent industry.7)Sanitary Napkin and Diaper Industry: I propose to expand the tax benefit on sanitary napkin and diaper industry by decreasing the rate of customs duty on the import of raw material, Textile backed sheet/ Non-woven air through bonded (ADL).
8) Steel Industry: I propose to reduce the duty on the import of refractory cement to promote the steel industry. In addition, I propose to increase regulatory duty of three raw materials (Ferro-Manganese, Ferro-Silicon, and Ferro-Silico-Manganese) to protect the steel raw materials manufacturing industry.
9) Plastic and Packaging Industry: I propose to reduce the duty on the import of photographic plates of plastic to promote the plastic and packaging industry.
10) Paper Manufacturing Industry: I propose to reduce the duty on import of washing and cleaning agent for the paper industry.
11)Lube-blending Industry: I propose to reduce the existing customs duty rate on the import of base oil, the main raw material of the lube-blending industry, to promote the said industry in Bangladesh. In addition, the minimum value for base oil, lubricating oil and liquid paraffin has been proposed to be rationalised.
12) C.R. Coil Industry: I propose to increase the existing regulatory duty on the import of finished products for the C.R. coil industry to protect this sector.
13) LPG Cylinder and Auto Tank Industry: To provide incentives to the emerging LPG cylinder and auto tank manufacturing industry, I propose to extend concessionary tax benefits on several new raw materials and rationalise existing tax benefits.
(C) Health Sector
Madam Speaker
199. To combat the outbreak of the COVID-19, special notification has been issued as an interim mechanism before the budget to exempt all import duties and taxes on coronavirus testing kits, masks and personal protective equipment (PPE) and on the raw materials required to locally produce hand sanitisers, masks and PPE. To further strengthen the health sector, I propose to reduce import duty on essential raw materials for locally producing Autoclave machines used for sterilising medical instruments.
(D) ICT Sector
200. Cellular phone is one of the main elements of the ICT sector. Due to the concessionary duty benefits enjoyed by the cellular phone manufacturing industry on the import of raw materials, local manufacturing and assembling operations of cell phones have flourished in Bangladesh. To encourage cellular phone manufacturing and further strengthen the industry, I propose to rationalise the existing import tax concessions and make it more investment-friendly. In addition, to protect the local industry it has been proposed to set the minimum assessable value of cellular phones at the import stage to ensure proper valuation and just revenue.
(E) Import of Gold
Madam Speaker
201. Despite the Gold Policy 2018, gold has not been imported legally into the country due to the existing high tax incidence. I propose to withdraw 15 percent VAT on the import of gold bar to discourage illegal import and encourage the import of gold on legal routes through authorised dealers. I hope this measure will boost up gold importation through the legal route, expand the local gold ornaments making industry and enhance VAT at the local stage (Table-3 of Annex-B).
Madam Speaker
202. To increase the electricity generation capacity the government encouraged the setting up of furnace oil-based power plants to generate electricity quickly on an emergency basis after taking the responsibility of government in 2009. In this regard, the import duty on furnace oil was waived at the import level in 2011 through a gazette notification to reduce the generation cost of electricity. Alternative fuel has already been available, and power plants have been built based on such fuel to generate electricity at an affordable price. As a result, the country is now generating more electricity than is required. Therefore, I propose to withdraw the exemption benefit on the import of furnace oil to discourage the installation of furnace oil-based power plants.
203. I propose to reduce the duty rate on the import of electrical signalling equipment, one of the main components of deep sea fishing, to encourage the fishing sector and tap the potential of the blue economy.
Madam Speaker
204. I propose necessary amendments in the Customs Act, 1969, to establish the Bangladesh Single Window Commissionerate, implement the De Minimise Rules, expedite the clearance of imported goods to remove port congestion, reduce the discretionary adjudicating power of customs officers, and reconstitute the Appellate Tribunal for speedy disposal of litigations.
Madam Speaker
205. Amendments in the First Schedule of the Customs Act: We have observed that there are clerical errors and inconsistencies in the existing structure of tariff headings and H.S Codes. In order to
Simplify international trade process, I propose to rationalise the duty rates, create new H.S Codes where necessary, delete and correct H.S Codes and notifications (Table-4 of Annex-B).
206. Rationalisation of minimum value relating to some goods attracting high duty has been proposed for enhancing revenue collection by combating under-invoicing of high valued items.
Madam Speaker
207. The country’s economy has come to a standstill due to the COVID-19 pandemic halting the rapid progress of the economy. In order to overcome this situation, there is no alternative but upgrading customs to international standards to facilitate import and export trade. Several measures like upgradation of the ASYCUDA World, National Single Window, Automated Customs Risk Management, Authorized Economic Operator, etc. have already been taken by the NBR to modernise Bangladesh Customs. If these measures are implemented in due time, the ease of doing business ranking of Bangladesh will improve, investment will be facilitated, and the wheels of the country’s economy will be further accelerated. I believe, these measures will bring a new horizon in revenue generation.
208. The economy of Bangladesh has continuously progressed so far, and is receiving appreciation from everywhere in the world today. We are determined to join the club of developed countries. The role of the revenue administration in this regard is very significant. If we can properly implement the modernisation, automation and expansion initiatives, it is expected that revenue administration would become more accountable and transparent, and the increased revenue collection would bring greater dynamism to the economy of our country. We shall achieve our development goals.
(Taken from the official budget speech of Finance Minister AHM Kamal presented in Parliament on Thursday, June 11, 2020)
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