Bangladesh Supermarket Owners’ Association has requested the NBR to ensure a uniform VAT rate for all stores.
They said they should be allowed to pay VAT at a square foot-based package rate to facilitate expansion of their business.
Currently, 4% VAT is applicable to sales of supermarkets like Agora, Shwapno and Meena Bazar while other shops including large ones and departmental stores enjoy package VAT facility under which shop owners pay VAT annually based on their shops’ locations and sizes.
“Customers feel discouraged from buying products from superstores as there is 4% VAT on sales of super shops while other general stores pay VAT at a flat rate although the pattern of doing business is same,” the association vice-president Kazi Inam Ahmed said yesterday while attending a pre-budget discussion of NBR at its headquarters.
NBR Chairman Md Nojibur Rahman chaired the meeting.
There was 1.5% VAT on the sale of superstores in fiscal year 2010-11, but the government hiked it to 2% in FY11-12 and again to 4% in FY12-13. In February 2014, the VAT rate was halved to 2% again, but the government doubled it again in FY15-16.
The supermarket industry came into being in 2000 in Bangladesh and was witnessing an increasing growth trend, but when the government doubled its VAT from 2% to 4% in 2012, the industry witnessed an immediate drop of 25% of its clients, said Inam.
The market again drew consumers’ interest in 2014 when the government halved the duty to 2%, but the duty was again
hiked to 4% after a year that
again resulted in dissuading customers from visiting superstores, he added.
“More than 20 stores had to keep their shutters down due to the matter, including five of Meena Bazar and eight of Agora,” Inam said, demanding a uniform VAT rate for all stores.
If the government takes cognizance of the demand, it will help expand the industry, thereby giving a boost to revenue collection, he added.
Supermarkets have been very popular across the world as they offer essential commodities to customers under a single umbrella. The number of superstores in Indonesia is 14,000, 3,000 in India and 1,000 in Sri Lanka.
But it is only 120 in Bangladesh which is insufficient if compared to the demand, according to the association.
Describing the reasons behind the supermarket growth in those countries, Inam said the supermarket industry out there was kept out of VAT net, keeping in mind about its contribution to food safety and food security.
“But there are many hindrances to expansion of the industry in Bangladesh. The industry, however, can reach a position by 2021 if the government enacts investment friendly policy and immediately implements that,” he said.
Placing another core demand, the association vice-president said the growth of supermarket is being hampered due to tax on capital machinery that varies from 65% to 100%, making it uncompetitive with the small local shops.
“These machines are very expensive and cannot be used for any other requirements. So the tax should be treated as 5%,” he suggested.
Inam also urged the revenue authorities to withdraw 9% VAT on the rent of superstores.
BSOA President Niaz Rahim and general Secretary Md
Zakir Hossain also attended the meeting.