The government is now depending on supplementary duty (SD) to mobilise the revenue deficit triggered from the deferral of the enactment of Value Added Tax and Supplementary Duty Act-2012.
The government has raised SD on dozens of products, which would push up the prices as well as affect the manufacturing businesses, according to the Finance Bill 2017, passed in the House on Wednesday.
In the national budget for the fiscal year 2017-18, the government had earlier set an ambitious revenue target of Tk91,257 crore highly depending from VAT collection since it then considered enacting the VAT law from the upcoming fiscal year.
Eventually, the government was compelled to backtrack from its stance regarding the law following a growing pressure and criticism from the business community and even from lawmakers in the parliament.
Since the law enactment is deffered by two years, it would not be possible to reach the revenue target from the VAT collection. Moreover, the postponment has raised questions as to how the government will face the budget deficit.
The VAT collection target will see a shortfall of Tk17,000 crore due to the government move, which delayed the imposition of a 15% flat VAT rate for all sectors.
Though Finance Division officials said the decision may force the government to borrow more from savings certificates and banking sectors to meet the deficit, the tariff line finalised for different products show that the government banked on import duty.
As a result, the government has revised Finance Bill 2017, approving it by imposing SD on import of a good number of raw materials used for manufacturing purposes.