VAT, supplementary duty target to be 33% higher in FY2017

The government is going to set an ambitious VAT and supplementary duty collection target for the upcoming fiscal year, which is 33.16% higher than the current year’s revised target. This is feared to put additional financial pressure on mid- and low-income groups. Finance Division officials said the government will achieve the next fiscal year’s revenue target of Tk2,48,000 crore if the National Board of Revenue ensures generation at a proposed VAT rate not below 10%. Meanwhile, Prime Minister Sheikh Hasina has asked for a reduction of the VAT rate to 12% from 15%. However, the matter will be settled after the prime minister’s return from Saudi Arabia, officials said. Following a prescription of the International Monetary Fund, the government has enacted the new VAT law to introduce a 15% flat rate of VAT changing the present multiple rates. In reply to a question, Finance Minister AMA Muhith at a pre-budget meeting on Sunday said the rate of VAT would be reduced from 15%. Muhith said the VAT rate would be a unified one. The NBR wants to generate 33.16% or Tk87,887 crore more revenue in the new fiscal year from the outgoing year’s revised target by means of the new VAT law, according to a proposal of the NBR. The NBR’s VAT and supplementary duties collection target for the on-going fiscal year 2016-17 is Tk74,114 crore. However, the revised outlay is Tk66,000 crore. In the current fiscal year, the NBR managed to collect Tk52,842 crore till April which is 18.40% higher than that in the same period of last fiscal year. In the FY2015-16, it was Tk44,631 crore. According to the finance minister, the VAT-free turnover ceiling may be increased to Tk36 lakh from Tk30 lakh set in the new law. The proposed VAT turnover limit will be increased to Tk1.50 crore from the existing proposed Tk80 lakh, according to the proposal. Former caretaker government adviser and financial sector analyst AB Mirza Azizul Islam said the proposed revenue generation target for the new fiscal year “looks ambitious.” He said additional pressure would be on the low and mid-income groups if the taxmen rely heavily on the new VAT law to collect more revenue.