The Value Added Tax and Supplementary Duty Act 2012 will be implemented from July 1. Are the businesses ready for the new VAT rate?As a business leader, I am very worried and tensed about the new VAT law. The 15% rate will hurt the business, especially SMEs. Although the government has offered rebates, it will be very tough to maintain accounts for small companies due to higher expenses.
The government is also going to announce a budget of over Tk400,000 crore and may impose more taxes on business to meet the budget earnings. If the 15% VAT rate is executed, the business community will be destroyed.How will the 15% VAT rate hurt small businesses?Under the previous law, we did not need to pay VAT for, say, a loaf of bread costing Tk100. Now, however, we will have to pay VAT for that as well. This system will affect the standards of living of poor people. We are already facing major competition since many products are being imported from India, China and Myanmar. An increased VAT rate will be an added problem in the existing situation.
Moreover, we have to pay tax on tax, thereby making our loans much heavier burdens.The government has mentioned rebates, so why you are worried?Rebates are complicated processes. The government says it will give us tax rebates, but how will they ensure smooth operation of maintaining vouchers on the small business end? SMEs struggle to breakeven most often. They do not have the ability to pay an additional person to maintain the voucher system.If you could reassess the 15% VAT rate, what would you want instead?We want multiple VAT rates and the continuation of VAT packages. We have urged the government, through the National Board of Revenue (NBR) and the Finance Minister AMA Muhith, to set the VAT rate at a highest of 7%.The standard VAT rate in Malaysia is 6%, 7% in Singapore, 10% in Indonesia, 5% in Nigeria and 12% in the Philippines. So why do we have to pay 15% VAT?So our proposal would be to go with multiple VAT rates, set a VAT ceiling at 7%, allow small businesses with a turnover of less than Tk5 crore, to pay Tk28,000 as package VAT and allow businesses with a turnover of Tk5-8 crore to pay 3-4% VAT.Do you think there is any chance that your proposal regarding the VAT rate will be considered?We have had several meetings with NBR, but they did not pay heed to our demand. Still, we have some hope before the 15% VAT rate is implemented. I believe that things could still change during the business consultative meeting between NBR and the Federation of Bangladesh Chambers of Commerce and Industry on April 30. Once that meeting concludes, we will come to know what the government’s position is in terms of the revised VAT rate.
Since the NBR treats us like its partners, we hope they will cap the VAT rate at 7% and continue the package VAT system.If the VAT rate is set at 15%, what will be your next move?Businesses want to pay tax. If we do not pay tax, it will not be possible for the country to develop. The revenue authorities need to understand that and not further burden those who already pay taxes.
Without considering our proposal, the implementation of the new VAT law will be a suicidal decision. The businesses will have to shut down. Business leaders will be forced to go to the prime minister. As she is pro-business, she will definitely direct the authorities concerned to consider our situation.What is your final stance regarding the new VAT law?We do not want this extra tax burden. We hope the NBR will consider our demand, since our proposal is based on authentic market information. The government should move slowly in this regard and maybe consider gradually increasing the VAT rate for every year.
Thursday, June 04, 2026
