Existing VAT act likely to remain in place for next two years

The existing VAT act of 1991 is likely to remain in force for the next two years while the proposed VAT and Supplementary Duty 2012 law will be suspended. According to Finance Division officials, the government has planned to postpone implementation of the new Value-Added Tax (VAT) law from July 1, sensing that it might put a negative impact on people’s life. Besides, the National Board of Revenue in association with the Finance Division is now working on a range of issues coming under acute criticism by the businessmen. Asking not to be named, a highly placed source in the division said: “It is good for the country since the new VAT proposal is going to that direction as envisioned by the prime minister.” The premier has taken into account the business communities’ demands for suspension of the proposed VAT law, added the source. “The prime minister wants to reduce people’s sufferings in connection with VAT before the national polls that will be held in December next year.” Sources said another summit meeting will be held today, with Prime Minister Sheikh Hasina in the chair, to decide on the new VAT law. Despite criticism in and out of parliament, Finance Minister AMA Muhith declined to comment on the matter Tuesday when asked to clarify the government stance on the new VAT law. “You will come to know when I speak on June 28 and when the prime minister covers some budget issues and some by me in parliament. There is no chance to know about it before that,” he said. The minister added that it is not appropriate to disclose anything while the budget session is going on at parliament. If the 15% flat VAT rate under the new law had been in place, it would have raised the cost of living, said stakeholders. On June 1, the finance minister proposed the national budget for the Fiscal Year 2017-2018. A 60% increase in excise duties on bank accounts was also a part of the budget. According to the Finance Division, things began to change after Muhith placed the budget proposal for implementing the new VAT law from July 1, putting an end to the existing multiple VAT rates, which have brought more than 100 goods and services under it. For execution of the proposed law, Muhith even offered a concession, raising the VAT-free turnover ceiling to Tk36 lakh from Tk30 lakh to make businesses happy. Firms with the new annual turnover limit will completely be out of the indirect tax, according to the new budget proposal. The minister also proposed raising the limit for VAT registration to Tk1.5 crore a year from Tk80 lakh in line with the demands from businesses. In addition, in the proposed budget, Muhith offered VAT exemptions for 1,043 items including essential commodities and services, basic education, healthcare and medical services, numerous life-saving drugs as well as firm produces.