The National Board of Revenue (NBR) is moving to eliminate the scope of levying value added tax (VAT) at multiple rates and keep 15% as a flat rate to be included in product prices.
Once approved in the proposed national budget for FY24, the VAT collected from consumers at varied rates, such as 5%, 7.5%, 10%, and specific tax would stand nullified in phases, sources said.
Such multiple VAT rates are creating distortion in the collection system, official sources said, and reports say there are also leakages, that is, the tax is charged from the buyer but it loses way to the exchequer.
The VAT wing of the National Board of Revenue (NBR) foresees that revenue from top ten contributing sectors, including tobacco, is unlikely to increase equally in coming years as some manufacturing sectors have been deeply hurt by the rising energy prices, they said.
The NBR collects 30% of its VAT revenue from local sources, particularly from cigarette manufacturers.
In the original VAT law, the government, following recommendation of the International Monetary Fund (IMF), had tried to introduce a 15% unified rate.
Later, the NBR amended the law and incorporated multiple rates following steep opposition from the business community.
For FY23, the VAT collection target has been set at Tk121,000 crore followed by Tk143,000 crore in FY24, Tk170,000 crore in FY25 and Tk203,000 crore in FY26.
Officials said the NBR already started imposing taxes on the sectors enjoying tax exemptions for a longer period of time.
In FY22, the VAT wing withdrew tax exemptions on production of concrete ready-mix product, refrigerator, mobile- phone manufacturers, and meditation and first-class non-AC intercity bus services.
The businesses would also get relief from submitting VAT-related documents to the NBR separately as the EFD would be connected to the NBR server to transmit real-time data.
A large number of VAT-registered units are retail and service sectors where leakage of VAT payments is considerably high.