A complexity over collecting value added tax (VAT) on electricity retail prices at supply stage has surfaced with the National Board of Revenue (NBR) mulling of setting power prices including the existing 5% tax.
As a result, the Power Division and the National Board of Revenue (NBR) are going to sit with Bangladesh Energy Regulatory Commission (BERC) in Dhaka today to discuss the complexity over the declaration of new power prices.
The Power Division can not instruct its electricity generation and distribution companies about how to impose and collect the VAT under the new law until the complexity is settled.
Mentionable, the new VAT Act will impose 15% tax on any product or service from July 1.
If the matter is not resolved quickly, around 2.20 crore users across the country will be face trouble in paying electricity bills.
According to a NBR notice issued on May 24, the Power Division would benefit though the law as it is selling power with subsidy despite a higher production cost.
The NBR, however, claimed that the retail power price would not increase even if the law is enacted, saying there is nothing for the consumers to worry about regarding this. The NBR, in an explanation, also said how it would adjust the electricity pricing at retail level.
Meanwhile, the Power Division is very much concerned about how the law will be implemented, though it has no objection with the imposition of the new VAT Act. Though the NBR provides the power generation and distribution companies with the rebate facility, its calculation is a complex process.
Moreover, there is no clear instruction as to how the VAT will be imposed if new retail price is fixed.
The NBR’s VAT Online Project Deputy Director Muhammad Jakir Hossain told the Dhaka Tribune on Wednesday that the meeting was called at the regulator’s office to clear all confusions over the law.
The NRB previously held a meeting with Power Division as well, he said.
When asked about why the price is being reset by adding VAT, he said: “We have approached to the BERC to help settle the issue.”
Talking about why the consumers will not have to pay extra, Jakir said: “Suppose, a consumer is using 75 units of electricity monthly. Considering Tk3.80 as the bill of each unit electricity, the total bill stands at Tk285. The amount of VAT on the bill considering the 5% rate is Tk14.25. Hence, the consumer has to pay Tk299.25.”
The NBR, corresponding with the new law, has instructed the Power Division to realise Tk299.25 in bills. In this case, the power distribution companies have been asked to charge 15%VAT instead of the existing 5% ceiling against the bill. The NBR says it would give rebate facility to the power distribution companies if they incur losses despite collecting bills including the 15% VAT.
When contacted, Power Division Secretary Dr Ahmad Kaikaus said
: “ The government wants to impose the 15% VAT to increase its revenue income, which we do not find contradictory. But, achieving the target is the main concern.”
If the distribution companies face losses in fulfilling the target, the government will have to provide subsidies again or increase the power prices, he said.
“We are conducting a study so that no negative impact arises after the new VAT implementation. Hopefully, we will find a solution very soon,” he said.