• Saturday, May 30, 2020
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Resorting to supershops, burdened by VAT

  • Published at 10:40 pm March 30th, 2020
web-meena-bazar-supershop
File photo Mehedi Hasan/ Dhaka Tribune

Appeals for supershop VAT exemption during the coronavirus crisis

People are opting to visit supershops to buy daily necessities at the onset of price hikes and a shortage of products in local markets amid the coronavirus crisis.

The Value Added Tax (VAT) imposed on most products in supershops is becoming a burden for many, especially working-class people with modest incomes.

Zakir Hossain, general secretary of the Bangladesh Supermarket Owners’ Association (BSOA) said everyone is coming to supershops during the lockdown situation, but their expenses are increasing because of VAT.

He was also of the opinion that buyers should not be subjected to VAT during this coronavirus pandemic.

“VAT is imposed by the government and they could exempt the 5% VAT imposed on supershops. We have sent an application to the Finance minister and the National Board of Revenue (NBR) urging the government to not take VAT from buyers for the next two months but we have not heard from them yet,“ said Zakir Hossain.

Salespersons in supershops said the difference in prices between supershops and local markets is primarily due to the VAT. The things you do not have to pay VAT for even cost less at supershops.

However, the demand for things the government has imposed VAT on, has increased in recent days.

Condition in supermarkets

Salespersons say people are coming to supershops because of the shortage of products in local markets and to avoid the unhygienic conditions of local kitchen markets.

Jamal Uddin of Mohammadpur said many people avoid supershops fearing higher prices due to VAT but Jamal Uddin prefers visiting supershops for goods that do not have VAT on them.

“Supershops are selling goods at a lower price than the local markets. During this crisis, the price of rice in supershops is at least Tk4-5 less than at local markets,” added Jamal Uddin.

This correspondent found that over the last few weeks the number of people going to supershops has increased a lot, while online and phone ordering has increased at least four times.

One of the reasons is that unlike local markets there is no scope for increasing or lowering prices in supershops.

If the price of a kg of rice is Tk60 in the local market it is Tk54 in supershops. Similarly, in the case of vegetables if the price of a kilo of vegetables is Tk100 at a kitchen market, it is about Tk60 in the supershops.

Sabbir Hasan Nasir, executive director of  supershop Shwapno said: “People from all walks of life come to Shwapno, most of whom are middle-class clients. People with limited incomes have to spend very carefully.

“Many are being forced to go to supershops during the coronavirus crisis but VAT is creating a burden on them. Many even react negatively having to pay  VAT.”

Sabbir Hasan Nasir also said: “It is imperative to withdraw VAT under the current circumstances. At least for the next couple of months the 5% VAT imposed on supershops should be suspended by the government.

Price hike

Meanwhile, the prices of necessary goods are going up arbitrarily in local shops and markets. 

The general public going into home quarantine are stocking up in excess,  creating a shortage of goods in the market. Disruption in the supply chain is also hampering the supply of goods.

Prices of daily necessities like rice and pulses have increased a lot. Adding VAT on top of that is nothing less than a nightmare for consumers.

Prices of things which already have VAT imposed on them, have increased the most.

According to the Trading Corporation of Bangladesh (TCB), the price of soybean oil has increased Tk20-25 in the last one year. 

In the  2019-20 budget the government hiked the tax on the import of sugar to protect state-run sugar mills.

According to TCB the price of sugar has increased 28% per kilogram, compared to last year. Sugar was sold at Tk50-55 per kg a month before Ramadan last year, whereas this year 1kg of sugar costs more than Tk70.

Tax has also been imposed on importing soybean, palm, sunflower, and mustard oil.

A 5% VAT has also been imposed on foods like liquid milk, powdered milk, chili powder, coriander, ginger, turmeric, and other spices.

Experts think the prices of things like sugar, oil are seen to be high because of the tax imposed on them and consumers are facing the effects of the price hikes.

Golam Rahman, president of Consumers’ Association of Bangladesh (CAB) said: “The government must do everything in its power to reduce the prices of things, especially withdrawing VAT from daily necessities.

“With the ongoing price hike, people with limited incomes are not being able to buy bare necessities like rice and pulses. The government should do something for them,” he added.

Centre for Policy Dialogue (CPD) researcher Khandaker Golam Moazzem said: “The first thing that must be ensured is providing consumers with their desired products. It is essential to make sure no one suffers from the lack of food and that the prices of goods do not go up.

“The supply of necessary items should be increased and VAT should be withdrawn from supershops if needed,” he added.

The national budget for the fiscal year 2019-20 is Tk 523,190 crore. To make the budget reasonably consistent with the standard VAT rate of 15%, a tax of 5%, 7.5%, or10% was added for specific goods and services. 

Consumers are thus burdened with even more taxes.

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