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The commerce ministry has requested the revenue authority to cut the value-added tax on edible oil and slash tariff on raw sugar imports to keep their prices stable during upcoming Ramadan when demand soars.
“We have made the request based on recommendations from a recent meeting among stakeholders, including businesses involved in trading of the commodities,” said a senior official of the ministry.
The move comes as soybean, palm oil and sugar became dearer in the local market over the last one month on the back of their escalating prices in the global market.
Bangladesh is dependent on imports for the commodities for want of adequate local production.
The country consumes 20 lakh tonnes and 17.5 lakh tonnes of edible oil and sugar respectively in a year, estimates Bangladesh Tariff Commission (BTC). Roughly 90 percent of the annual requirement of the two items are met through imports.
In Dhaka, the price of sugar was up 8 percent yesterday at Tk 64 a kg from a month earlier, according to data from the Trading Corporation of Bangladesh (TCB). Palm oil in loose or unpackaged form edged up 19 percent to Tk 81 per litre from December 10 last year.
Refiners hiked the price of soybean oil too: the average price of refined soybean oil was Tk 92 a litre yesterday, up 10 percent from a month earlier.
In a report submitted to the commerce ministry, the BTC linked the recent price hike to the increasing price in the international market, depreciation of the taka against the US dollar and the change in VAT structure from this fiscal year.
The National Board of Revenue (NBR) levied 15 percent VAT on all three stages — import, production and distribution — of soybean and palm oil from this fiscal year, ending the previous rule of collecting the indirect tax at the import stage only, said the commission report, a copy of which The Daily Star obtained from the commerce ministry.
The tax collector also slapped 5 percent advance tax on imports under the VAT and Supplementary Duty Act 2012, which came into effect on July 1.
The AT is adjustable and has been introduced to encourage businesses to keep records of transactions and accounts properly, the revenue authority says.
Because of the changes in the VAT structure, the import costs of crude degummed soybean oil (CDSO) and refined, bleached and deodorised (RBD) palmolein, which local refiners import and process to market locally, have soared, according to the BTC report.
In addition, the NBR imposed 5 percent VAT at trading and distribution stage from the current fiscal year.
The commerce ministry cited the changes to the VAT structure in a letter to the NBR on January 7 and said levying the indirect tax on the import, production, distribution and trading stages of the essential item like edible oil is “not desirable.”
“Prices of soybean oil, palm oil and palm olein had been stable in the past as VAT was exempted at production and sales stages,” the letter said.
Additional tax and VAT should be adjusted to keep edible oil market steady, the ministry said, citing the price spike in the international market and the ensuing Ramadan starting in the end of April.
The ministry came up with two separate proposals regarding the imposition of VAT on CDSO, crude palm oil and palmolein. It recommended levying 15 percent VAT only at the import stage of crude edible oil and exemption of the tax in other stages of the supply chain.
Alternatively, the ministry proposed VAT collection based on tariff value to keep prices stable during the fasting month, which sees higher consumption of commodities compared with other months because of various oil and sugar-based snacks and dishes.
The specific duty on raw sugar rose 50 percent year-on-year to Tk 3,000 per tonne in fiscal 2019-20, the commerce ministry said in another letter to the NBR.
The revenue board also increased the regulatory duty on the commodity by 10 percentage points to 30 percent in the current fiscal year.
Refiners who import raw sugar also saw the imposition of 5 percent AT and 5 percent AIT apart from the highest rate of VAT, according to the letter.
As a result, importers have to pay Tk 23,000 in tax and duty for per tonne of raw sugar.
So, it is necessary to adjust additional VAT and tax in view of Ramadan and increased prices in the global market, the commerce ministry said.
It will be possible to contain sugar prices and keep supply stable if additional taxes and duty imposed this year are removed from raw sugar imports, the ministry said.
(TDS)