Badrul Ahsan :
The government now mulls widening the list of VAT-exempted products and services to rein in any price hike of essentials and services, according to official sources.
Currently, some 535 products, mostly basic food, life-saving medicines and agriculture goods, and some services enjoy a zero-VAT benefit under the existing VAT Act-1991.
The National Board of Revenue (NBR), however, has proposed doubling the items to minimise pressure of the price hike of consumers and thus to stable the market.
The revenue board had almost finalised the list of products and services for giving exemption from payment of value-added tax under a new law, the implementation of which is due from July 1.
The list will be circulated in a few days to build consumer confidence as they are in fear of a price hike in many cases after implementation of the law that will impose uniform 15 per cent VAT on almost all goods and services. Such circulation of the list also aimed at creating awareness among the traders about this uniform VAT law.
The uniform 15 per cent VAT is much higher than that in the countries in South Asia, East Asia and other lower middle income countries where the average VAT rate is 10.7 per cent and median rate 12 per cent.
The law has, in general, specified some areas like basic food items for human consumption, life-saving drugs, transportation services, medical services, education and agriculture.
But it did not specify the names of goods and services for providing the exemption, officials said.
A significant number of goods like sugar, vegetable oil, spices and MS rod, which are to pay VAT now, may be exempted from payment of VAT.
Traders will also get some relief as many goods and services will be included in the exemption list, tax administration officials hoped.
They said education and medical services are likely to be totally exempted from VAT. Currently, VAT is applicable to tuition fees of English medium schools while some medical services also pay VAT.
Overall VAT burden on consumers and businesses will be lower after awarding VAT exemption and increasing the VAT-free annual turnover limit for small traders, they added.
The VAT-free turnover ceiling may be increased to Tk 50 lakh from Tk 30 lakh.
In the existing law, traders having annual turnover above Tk 7 lakh have to pay VAT in any forms like package VAT and trade VAT.
