Indian company Bharat Heavy Electricals (BHEL) which acts as the contractor for the under construction 1,320MW coal based power plant in Rampal is going to get tax exemption for bringing in machinery and equipment for the plant.
The decision of giving the contractor this favour of tax exemption at source was taken during a meeting at the Ministry of Finance on Sunday. Finance Minister Abul Maal Abdul Muhith presided over the meeting.
The National Board of Revenue (NBR) is going to provide its approval in favour of BHEL and the owner of the plant Bangladesh-India friendship Power Company Limited (BIFPCL) very soon, sources present at the meeting said.
Previously, BIFPCL was exempted from paying VAT for 10 years as it was implementing a project listed under the fast tract project of the government. Bangladesh Power Development Board (BPDB) and the Indian National Thermal Power Company Limited (NTPC) have equal ownership of the BIFPCL.
BIFPCL selected BHEL as the contractor of the plant in March. Indian Exim bank has provided its primary consent to provide loan for the project.
Senior officials from the Finance Division and NBR said that BIFPCL was earlier given a favour of VAT exemption. Now if a contractor of this company gets another tax exemption on machinery and equipment then other companies implementing large projects in Bangladesh would also want the same from the NBR.
“The government will lose a huge amount of tax money because of that,” an NBR official said.
A senior Power Division official however, said that if tax was imposed on bringing machinery and equipment for the power plant, it would put an impact on the electricity production cost.
“BIFPCL will later realise that money. So imposing tax on machinery and equipment now will be like taking money from one pocket of the government and putting it in the other pocket,” said the official.
In March this year, BIFPCL and BHEL applied for tax exemption on machinery and equipment for the Tk14,999 crore project.
Later, Power Division, Minister of Finance and NBR were given letters to grant their application of tax exemption. NBR rejected their application.
NBR said, as per the Income Tax Act 1984, NBR had already exempted VAT for the next 10 years of commercial operation of the BIFPCL’s plant. Aside from that the company had been exempted from some other taxes too under the consideration that it was a private electricity producer.
After NBR declined to exempt taxes for BHEL, Power Division sent a letter to NBR in March 30, again asking NBR to take the tax exemption issue into consideration. Later the three parties sat in several meetings.
Under the circumstances, Nasrul Hamid, State Minister for Power, Energy and Mineral Resources brought this issue to the attention of Prime Minister Sheikh Hasina during a meeting at the Prime Minister’s office. As per the direction of the prime minister, the meeting in Finance Ministry took place on Sunday.
Meanwhile, a senior official of BIFPCL said that the issue of tax exemption is in the Engineering, Procurement and Constructing (EPC) contract.
BPDB and NTPC signed a Memorandum of Understanding (MoU) in 2010 for the construction of the Rampal power plant. The projected cost of the coal based super critical power plant is Tk14,999 crore.
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