Budget FY22: Restaurant owners demand VAT reduction

Restaurant owners on Saturday demanded reducing value added tax (VAT) for all types of restaurants - lower, moderate and fine dining - in the proposed national budget for fiscal year 2021-22.

They also demanded abolishing the 10% supplementary tax during a post-budget press conference organized by the Bangladesh Restaurants Owners Association (BROA) in the capital.

Imran Hassan, general secretary of BROA, said that the proposed budget for FY2021-22 mentioned 15% VAT for air-conditioned (AC) and 5% for non-air-conditioned restaurants. 

“We want VAT to be divided into three slabs as per their stature, 3-5% for lower and moderate categories, 7.5% for fine-dining restaurants, and 15% for five-star and four-star categories restaurants. That way, the pressure on small traders will be reduced and the government will also get their revenue,” he also said.

The BROA general secretary also said that the non-AC restaurants had to pay 7.5% VAT earlier. But nowadays, AC is a general necessity. These categories for VAT payment should be reformed.

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“We also proposed a 2% VAT for canteens or cafeterias of educational institutions, hostels and industrial factories, as well as fixing a maximum VAT rate of 3% on rent for restaurant establishments,” said Imran Hassan. 

Syed Mohammad Andalib, organizing secretary of BROA said that at present AC is no longer a luxury service. AC is used in almost all categories of restaurants. 

So, fixing of VAT by dividing restaurants between AC and non-AC category is causing discrimination in VAT collection. As a result, many ordinary restaurants are reluctant to pay VAT and the government is also losing revenue, he added.

BROA also said that despite being an emerging industry in the country, the restaurant industry is harassed due to lack of coordination among many government organizations. 

According to BROA, at least 13 organizations under different ministries and departments are involved in restaurant management. They suggested that the government coordinate among themselves and give responsibility to any one organization to manage restaurants.

Moreover, 7 organizations including the DC office, Safe Food Authority, Consumer’s Rights Protection Authority, RAB and BSTI - monitor the restaurants. 

“BROA wants a single organization to monitor the restaurants and the government should create this in coordination with all of them,” said Syed Mohammad Andalib. 

Ashfaq Rahman Asif, publicity secretary of BROA, said that there are no specific policies for online food business and delivery. As a result, they are currently conducting business arbitrarily and putting the hotel-restaurant sector at a risk.

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In the context of e-commerce, restaurant owners also said that there should be fixed a commission of 10% in the case of takeaways, parcels and online deliveries and a fair policy should be formulated to control them.

BROA also demanded a six-month incentive for the officials and employees of the hotel and restaurant sector for monthly food assistance for them for the period of July to December of this year.

They also demanded loans from SME Foundation in easy terms to keep the hotel-restaurant sector afloat and the amount up to Tk10 lakh to Tk1 crore without collateral, at a maximum rate of 4%.

According to BROA, there are currently about 60,000 restaurants across the country, with more than 8,000 in the capital alone. Close to 2.8 million people depend on the restaurant industry for their livelihoods, while the number is several times higher if it includes the supportive sectors.

Nearly 25-30% of the restaurants closed permanently after the first wave of Covid-19, and 50% of ownerships were transferred as their original owners could not survive, said the BROA.