Parliament on Wednesday passed the finance bill for fiscal year 2017 with a voice vote, but with unprecedented changes across a number of areas including postponement of the uniform 15% VAT law and changes to bank deposit excise duties.
Finance Minister AMA Muhith said that the excise duty will now be zero for deposits under Tk100,000, Tk150 for deposits between Tk100,000 and Tk500,000, Tk500 for Tk500,000-10 lakh, Tk2,500 for deposits between 10 lakh to Tk1 crore and Tk12,000 for deposits between Tk1-5 crore, and Tk25,000 for deposits higher than Tk5 crore.
Earlier, the finance minister in his budget speech on June 1 had proposed that the excise duty on deposits between Tk1 lakh to 10 lakh be raised to Tk800. As such, the excise duty on deposits below Tk10 lakh is now lower than had been proposed, while the excise duty remains unchanged from the proposed amounts for deposits above Tk10 lakhs.
Furthermore, as the uniform 15% VAT law has been temporarily scrapped for two years, the VAT on local motorcycle manufacturers, meditation services, LPG plastic and iron containers, and computer and mobile phone accessories will remain unchanged from the outgoing fiscal year.
The postponement of the uniform VAT law was widely appreciated by parliament members, Muhith said, adding that Prime Minister Sheikh Hasina herself suggested the two-year delay.
The VAT on spices such as chili, coriander and turmeric will be refixed, but the tariff rates will be maintained.
Former finance adviser Mirza Azizul Islam told the Dhaka Tribune that there will be a slight shortfall in revenue generation as the VAT law will not be implemented, however this is unlikely to significantly impact next year’s budget deficit.
He suggested increasing the number of firms registered to pay VAT in order to counteract the shortfall.
In addition, waivers to import and supplementary duties have been granted for certain products of Microsoft, motorcycle parts, and solar panels while the supplementary duty for refrigerator assembly has been lowered to 20% from 30%.
Also, while the tax at the source has been increased to 1% from 0.7% for ready-made garments (RMG) manufacturers, the income tax has been reduced to 12% rather than the proposed 15%, while it has been reduced to 10% as opposed to 14% for green RMG factories.
Besides, Muhith said that a decision on the tax system for British-American Tobacco will be taken after the final budget is officially announced. The taxes on digital TVs and backward linkage glassware industries may also be revised later.