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SMEs want tax cuts on import of raw materials

  • Anisul Islam Noor
  • 14 September, 2021 12:00 AM
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SMEs want tax cuts on import of raw materials

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Small and Medium Enterprises (SMEs) urged the National Board of Revenue to reduce tax burden on them as they were still reeling from the pandemic shocks.

The sector people said they have to pay 30 percent tax in advance on import of raw materials.

Besides, 7 percent more income tax at source (TDS) is another barrier for the manufacturing sector, they said.

SMEs said they are struggling with capital shortages and in this situation, the burden of 30 percent tax in advance (customs duty 5 percent, VAT rebate 15 percent, Advance Tax 5 percent and Advance Income Tax 5 percent) is not business friendly at all.

Although the NBR cuts 15 percent VAT in advance to rebate it adjusting with annual income of a company, the revenue board official would not return or rebate VAT.

An NBR official said there is a lack of trust and honest dealing between the both sides - the NBR and business community.

Former NBR chairman Dr. Muhammad Abdul Mazid told the daily sun that both the business society and the NBR would need to sit together and discuss honestly for removing the hurdles, if there is any, in this pandemic situation.

While the tax rules are complex, the businesses look for different windows for avoiding the tax, he said.

He said the developed countries follow a standard policy in collection of VAT and other taxes while the businesses are usually honest in the tax payment.

“There is no need to collect such VAT and tax in advance if all the business people maintain their accounts transparently and declare honestly the value of imported goods or raw materials.”

“But it is happening yet. As a result, there remains complexities in imposing VAT and tax as well as in its collection system,” Dr. Mazid said.

He emphasised the need for quick installation of automation system to check tax evasion and reduce the harassment in revenue calculation and collection.

Managing Director of Xclusive Can Limited Syed Nasir, an eco-friendly tin container manufacturer, said an entrepreneur of SME sector has to pay 7 percent advance income tax at source while their gross profit margin is less than 5 percent.  

He mentioned, “This type of tax imposing is an obstacle for the growth of SME and CMSME sectors.”

The NBR realized 30 percent tax in different names before releasing goods and raw materials imported for the SME manufacturing industries, which means a big portion of capital goods blocked by the advance tax, he said.

“Bangladesh reduced tax to 1 percent on capital mercenary imports for the sake of development of the local industries, but imposing excessive tax and realizing it in advance is not helping the SMEs to grow,” the entrepreneur said.

The SME sector has been facing the hurdles in supplying products to the big industries due to 7 percent advance income tax at source, he said.

“When a manufacturer wants to produce a part of its product by an SME entrepreneur through subcontracting, he/she has to pay a 10 percent value-added tax, which increases the cost of doing business,” he said.

The SME sector has witnessed significant growth in employment generation at an annual rate of 50 percent in the five years to 2019.

The employment growth was 75 percent between 2016 and 2019, the sector insiders said.