Economy
VAT likely to go up on 13 items – from fruit juice to LED bulbs to home appliances
The government plans to increase the value-added tax (VAT) on more than 13 goods and services, including LED bulbs and tube lights, various juices, mango bars, rolling paper, security services, auction services, refrigerators, and air conditioners.
Finance ministry officials said most of these items may face a 15% VAT at the manufacturing stage. Additionally, the VAT exemption for air conditioner manufacturing is likely to be phased out this fiscal year ending on 30 June, potentially subjecting it to a new 5% VAT in FY25.
For refrigerator manufacturing, the VAT rate is expected to increase from the existing 5% to 10%.
Furthermore, mobile operators are expected to face an increase in tax on the sale of SIM cards, rising from the current Tk200 to Tk300, according to finance ministry officials familiar with the next fiscal year’s budgetary planning.
Sources indicate that the International Monetary Fund (IMF) has advised the government to withdraw various tax exemptions, prompting the National Board of Revenue (NBR) to plan their discontinuation and rate increases for the next financial year.
Although the government had previously exempted the country’s electronics sector from VAT for several years, the NBR plans to impose VAT on air conditioner manufacturing starting in the next financial year, industry insiders added.
They expressed concerns that this move would increase operational costs, necessitating the transfer of much of the burden to consumers during times of high inflationary pressure.
Seeking anonymity, a top official of a leading mobile phone operator said further taxes on SIM card sales would negatively impact business growth.
Mobile phone operators said they fear a potential decrease in new connections in the next fiscal year and expressed concerns about the impact on foreign direct investment (FDI) due to these fiscal policy changes.
Kamruzzaman Kamal, marketing director of PRAN-RFL Group, emphasised that no company has the capacity to absorb such production cost increases if VAT rates rise.
“These costs will have to be passed on to consumers, otherwise businesses will struggle to afford them,” he added.
The electronics industry, once fully dependent on imports about ten years ago, has grown as an import-substitute industry.
Kamruzzaman expressed concern that, after the VAT rate increase, the industry may lose competitiveness against imported products. He also expressed worries that the air conditioner manufacturing industry, which is still in its infancy, might not develop further.
Seeking anonymity, an official of Walton Group said manufacturers can meet approximately 90% of the local demand for refrigerators and 60% for air conditioners.
“When the government withdrew the VAT exemption on refrigerator manufacturing, the industry faced setbacks in the current fiscal year’s budget. Another blow may await both industries in the new budget,” he added.
The official said the government’s fiscal policy has adversely affected their export market exploration plans, and adding a VAT increase on electric bulbs will affect both consumers and businesses.
Conversely, increasing the VAT rate from 5% to 15% on mango bars and juice, tamarind juice, guava juice, pineapple juice, and mango bar manufacturing could limit access to nutritious products for people.
According to finance ministry officials, obtaining security services from third-party companies and participating in auctions will be costlier in the next fiscal year, with the government planning to raise VAT on both services to 15% from the current 10%.
In FY21, the government exempted about Tk3.18 lakh crore in taxes, including Tk1.5 lakh crore from VAT and Tk1.25 lakh crore from income tax. These exemptions are categorised as tax expenditures.
As part of the $4.7 billion loan package, the IMF has stipulated conditions, including the rationalisation of tax expenditures. All types of tax exemptions are expected to be phased out by 2027 to enhance revenue realisation.
Referring to the countrywide recent havoc and atrocities, Prime Minister Sheikh Hasina today said that she had an apprehension there might be a strike like this by the BNP-Jamaat clique to pull down the country’s prosperity.
“. . . they (BNP-Jamaat) had wanted not to hold the elections, but we had arranged the elections. After election they thought it wouldn’t be accepted by all, but we’ve also made it acceptable to all and we’ve formed the government. It was an apprehension to me that there would be a strike like this,” she said.
The Premier made this remarks while exchanging views with editors, senior journalists and head of news of various media outlets, organised by Editors’ Guild at her office (PMO).
She mentioned that before and after the election in 2013-14, the BNP-Jmaat clique unleashed arson attacks and killings that left hundreds of people killed and thousands injured.
“It was little bit understandable that this (the activities and movement of the students) was a grave conspiracy,” she said.
Sheikh Hasina said that she didn’t want any incident which might invite any unwanted situation that will invite instability in the country. “It was the target to destroy country’s economy,” she said.
She questioned about the understanding level of the people who supported these mayhem aiming to cripple the country’s advancement and prosperity.
Sheikh Hasina, also the chief of Awami League, said that vested quarter is highly interested to destroy country’s independence and the continuation of the democracy that is going on for long 15 years.
She again said that she never wanted to deploy army personnel in the field while the students were there for the sake of their security.
“While they (students) declared that they are not involved in the on going subversive activities then we called for army,” she said.
The premiers also said that she also didn’t want to impose curfew as the country is going through a democratic environment for 15 years.
She requested the people to resist those who have done this bane for the country. “They have destroyed all the structures have been built for their welfare and livelihood. They have struck all those structures. Who will be the worst sufferer? Of course, mass people. Now it is the responsibility of the mass people to resist these terrorism and militancy,” she said.
The premier called for creating mass awareness against the militancy that has opened in the destructive activities.”If the people don’t become aware then what could we do or how much we could do alone,” she said.
She also mentioned that the targets of the recent mayhem was Awami League, Freedom Fighters and pro-liberation forces.
The Prime Minister said that when all demands of the quota-free movement students were accepted why they gave scope to the militants for doing such heinous activities.
“One day the quota-free movement activists have to answer to the nation, why they gave such opportunity to them for this destruction to the country,” she said.
PM’s Press Secretary Md Nayeemul Islam Khan moderated the programme, while Editors’ Guild president Mozammel Huq Babu delivered welcome address.
Senior journalist Abed Khan, Bangladesh Pratidin editor Nayeem Nizam, DBC Editor-in-Chief and CEO Monzurul Islam, Bhorer Kagoj Editor and Jatiya Press Club general secretary Shyamol Dutta, Daily Jugantor Editor Saiful Alam, Jatiya Press Club president Farida Yasmin, Dhaka Journal chief editor Syed Istiaque Reza, Head of News Nagorik TV Dip Azad, Amader Somoy Editor Mainul Alam, Bangladesh Journal editor Shajahan Sarder, DBC news editor Zayedul Ahsan Pintu, Ashish Saikat of Independent TV, Bangla Tribune editor Zulfiquer Russell, head of News of 71 TV Shakil Ahmed, Energy and Power Editor Mollah Amzad, Head of News of Kings News Nazmul Huq Saikat and Mamunur Rahman Khan of RTV also spoke.
Britain’s inflation rate held steady in June after returning to the Bank of England’s target the previous month, official data showed Wednesday, confounding expectations for another modest slowdown.
The Consumer Prices Index was unchanged at 2.0 percent in June from the same level in May, the Office for National Statistics said in a statement, compared with market forecasts of 1.9 percent.
“Hotel prices rose strongly, while second-hand car costs fell but by less than this time last year,” said ONS chief executive Grant Fitzner.
“However, these were offset by falling clothing prices, with widespread sales driving down their cost.
“Meanwhile, the cost of both raw materials and goods leaving factories fell on the month, though factory gate prices remain above where they were a year ago.”
Analysts said the data could cause the Bank of England to sit tight for a while longer before starting to cut interest rates.
“The chances of an interest rate cut in August have diminished a bit more,” said Paul Dales, chief UK economist at research consultancy Capital Economics.
Last month, the BoE kept its key interest rate at a 16-year high of 5.25 percent, despite slowing inflation in May.
Britain’s newly elected Labour government welcomed news that inflation remained at the BoE’s target level.
“It is welcome that inflation is at target,” said Darren Jones, Chief Secretary to the Treasury, in a statement.
“But we know that for families across Britain prices remain high… (which) is why this government is taking the tough decisions now to fix the foundations” of the UK economy, he said.
Labour, led by new Prime Minister Keir Starmer, has pledged immediate action to grow the economy after the centre-left party won a landslide general election victory to end 14 years of Conservative rule.
Later on Wednesday, King Charles III will read out Labour’s first programme for government in a decade and a half, when the UK parliament formally reopens following the July 4 election.
Elevated interest rates have worsened a UK cost-of-living squeeze because they increase borrowing repayments, thereby cutting disposable incomes and crimping economic activity.
The BoE began a series of rate hikes in late 2021 to combat inflation, which rose after countries emerged from Covid lockdowns and accelerated after the invasion of Ukraine by key oil and gas producer Russia.
China’s economy grew 4.7 percent year-on-year in the second quarter of 2024, official data showed Monday, less than analysts had expected.
“By quarter, the GDP for the first quarter increased by 5.3 percent year on year and for the second quarter 4.7 percent,” Beijing’s National Bureau of Statistics (NBS) said in a statement.
The figures were much lower than the 5.1 percent predicted by analysts polled by Bloomberg.
Retail sales — a key gauge of consumption — also slowed to just two percent in June, the NBS said, down from 3.7 percent in May.
The world’s second-largest economy is grappling with a real estate debt crisis, weakening consumption, an ageing population and trade tensions with Western rivals.
Top officials are meeting in Beijing on Monday for a key plenum, with all eyes on how they might kickstart lacklustre growth.
