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Dhaka Tribune

NBR to waive exemptions, eyes 9,400C VAT hike in FY25

NBR also projects an additional Tk3,450 crore in revenue through restructuring cigarette taxation measures in FY25

Update : 18 Apr 2024, 03:53 PM

The National Board of Revenue (NBR) has projected to collect an additional Tk9,400 crore in value-added tax (VAT) in the upcoming FY25.

This increase is expected to come from three main sources: the highest by phasing out exemptions, restructuring cigarette taxation and installing electronic fiscal and sales devices, according to official documents.

A VAT collection action plan prepared by the VAT wing of the NBR estimates the highest contribution of Tk5,000 crore will come from scrapping full and partial exemptions currently enjoyed by businesses.

The paper, to be presented to an upcoming International Monetary Fund (IMF) mission later this month, also proposes imposing taxes on sectors currently exempt through budgetary measures.

Besides, it sketches out plans to bridge the compliance gap through new measures, all to boost VAT collection in FY25.

According to the action plan, the revenue board projects an additional Tk3,450 crore in revenue through restructuring cigarette taxation measures in FY25.

This is on top of the existing revenue of Tk4,050 crore expected from regular taxation.

The tax authority also expects to collect an additional Tk950 crore in VAT through the installation of Electronic Fiscal Devices (EFDs) or Sales Data Controllers (SDCs) in the next fiscal year.

The VAT wing of the NBR has identified several challenges in achieving the target for the upcoming fiscal year.

The challenges include import contraction, squeezed budgets for government projects, raw material import hurdles for manufacturing, ongoing dollar crisis and fuel supply concerns.

In the ongoing fiscal year, the NBR is currently working diligently to achieve its Tk140,000 crore VAT collection target.

For FY25, the NBR anticipates an 11.60% increase in revenue collection through regular measures.

To achieve the remaining target amount, the NBR has formulated the breakdown with quantification.

"The projected revenue target in the VAT sector for FY25 is largely dependent on multiple preconditions. About 40% of total VAT revenue comes from the manufacturing sector and about 5% comes from the trade sector," the paper said.

VAT in the manufacturing sector is mostly dependent on imported raw materials whereas revenue from the trade sector is dependent on the import of consumable items as well as the production of goods, it added.

This year, imports showed a negative trend which means if the trend continues revenue collection may be hampered, it added.

The VAT wing said revenue collected from government project procurement and other agencies usually accounts for 8-10 per cent of total VAT collection.

The government has set VAT collection targets of Tk143,000 crore for the current FY, Tk170,000 crore for FY25 and Tk238,000 crore for FY26.

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