The National Board of Revenue (NBR) still didn't find a way to bring the small roadside restaurants and mobile food courts for local and foreign food sellers under their VAT-Tax system.
Restaurant owners think this creates unequal competition in the restaurant business.
In addition to looking into the matter for the upcoming 2022-23 fiscal year budget, Bangladesh Restaurant Owners Association (BROS) has proposed to impose at least 3.5% VAT-Tax on these types of restaurants.
In FY21-22, the government reduced the VAT on restaurant food, which was initially set at 15%.
According to the amended Finance Bill 2021, meals include 10% VAT in air-conditioned restaurants or fast-food shops and 7% VAT in non-air-conditioned restaurants.
But the NBR has not been able to modernize their existing law to bring small roadside restaurants, mobile food carts and even the cafeterias in hospitals, schools, colleges, universities under their VAT taxation system.
A 2% VAT and 1% tax has been proposed for cafeterias and food courts in hospitals and educational institutions.
On February 10, after the meeting with NBR officials, Imran Hasan, general secretary of Bangladesh Restaurant Owners Association (BROA), told Dhaka Tribune: “The way the business is going now isn’t a good example for anyone. Some have to pay a high rate of VAT and tax but the others don’t pay at all. This is not an ideal business environment and this situation needs to be improved. In particular, small roadside restaurants and mobile food courts doing business beside the main roads.”
In the new proposal given to NBR, it has been proposed to cancel the 10% Supplementary Duty (SD) completely.
Asked about SD, he said: "We are paying VAT on the products we have bought once, so why should we pay SD on a separate basis? This is double taxation, so in a discussion with NBR officials today, we requested for the SD to be cancelled entirely.”
Regarding the meeting and BROS proposal, an NBR official who didn't want to be named said: “The restaurant sector has been on the brink of collapse due to the Covid-19 pandemic since last year. With that in mind, their VAT was reduced from 15%. This time they will propose something new in the ongoing discussions before the FY22-23 budget. The decision will be made after discussing with other government organizations.”
As per the section 55 imposition of supplementary duty under Value Added Tax and Supplementary Duty Act 2012, supplementary duty shall be imposed and payable on the import of goods, the supply of goods manufactured in Bangladesh and the supply of services rendered in Bangladesh.
Ehsan Ahmed, owner of Khana’s restaurant told Dhaka Tribune: “Restaurant businesses have not yet been able to overcome the impact of the Covid-19 pandemic. Moreover, the mobile food courts are creating a bad situation for the good restaurant traders who want to do business legally.”
“Moreover, the government should also think about SD. In fact, the modernization of this law as a whole is urgent,” he added.
In another recent directive, NBR instructed that consumers cannot be charged value-added tax (VAT) at checkout anymore. The VAT included price needs to be written on the product from now on.
That means the price shown on the menu will include the VAT, so that the customer understands how much they are paying.
According to BROA, there are currently about 60,000 restaurants across the country, with more than 8,000 in the capital alone. Close to 2.8 million people depend on the restaurant industry for their livelihoods, while the number is several times higher if it includes the supporting sectors.
