Cement manufactures on Monday said imposition of 5 percent advance tax (AT) on the import of raw materials for cement and 3 percent source tax on distribution will increase the price by Tk 42 on each sack of cement, putting an adverse impact on the entire construction sector.
Bangladesh Cement Manufacturers Association (BCMA) leaders made the observation at a press conference on the impact of new tax burden for this growing sector.BCMA president Md Alamgir Kabir, first vice-president Md Shahidullah and other leaders were present at the programme held at its office in the city.
Cement manufacturers are currently paying 15 percent VAT on the import of raw materials. Now they have to bear the brunt of more 8 percent tax (5 percent AT plus 3 percent source tax) following the budget proposal.
Expressing concern over the new rules for advance income tax (AIT) which used to be refundable earlier and which has now been made as final tax, BCMA leaders called upon the government to return to the existing policy in the field of advance income tax on the import of raw materials.
“If 5 percent AIT at import stage and 3 percent source tax are counted as final tax liability, the entire cement industry will count loss,” said Alamgir Kabir.
Explaining the new tax burden, Alamgir said the new proposition would also put a bad impact on the working capital of the business related to cement.
“Besides, cement is the prime materials for construction industry and a higher price of cement will put an adverse impact on the real estate, and industrialization will face a challenge,” added the BCMA president.He asked the government to retain the existing rule of 5 percent AIT on import of raw materials, and added that 3 percent source tax should be adjustable tax liability rather than final tax liability. He also suggested withdrawing 5 percent advance tax (AT) on the import of raw materials.
Raw materials for cement sector are hundred percent import centric and if there is no system of five percent tax rebate at import stage, at least 15 percent net profit will be totally impossible, BCMA president said, urging the government to reconsider the new imposition in the budget.
Terming the new terms unfriendly for cement sector, the leaders also said though the proposed budget for 2019-20 is business friendly, it is not favorable for the thriving cement sector.
“Imposition of new taxes seems to be unfavorable for cement. The government should think about the entrepreneurs and consumers,” Alamgir Kabir said, replying to a query.
The sector insiders think that the harmful effect on the cement sector will not only hamper development projects but also the GDP growth of the country.
The local cement sector is already facing tough situation due to increase in the price of raw materials in the international market.
Any hike in cement production cost due to imposition of additional VAT will result in the hike of cement price and project implementation costs, they said.
According to the BCMA leaders, entrepreneurs in cement sector has been taking new projects of setting up new modern factories which would boost the total investment up to Tk30,000 crore.
The total production is expected to stand at 5.5 crore metric tonnes whereas the existing demand of the country is around 3 crore metric tons.