On 1 June 2017, the Finance Minister Mr. Abul Maal Abdul Muhith presented the annual national budget of an outlay of TK 4 trillion for the fiscal year 2017-18. In the proposed budget, the finance minister has targeted a GDP growth rate of 7.4 per cent.
“GDP growth rate will be 7.4 percent in FY 2017-18 and inflation will come down to 5.5 percent by the end of the fiscal year,” Muhith told the parliament.
The government’s move to keep tax-free income threshold and the tax rates on individuals and firms unchanged in the next fiscal year is likely to affect many low and middle income people who would be new to income taxes.
Personal Income Tax
Minimum tax for Dhaka and Chittagong City Corporation is TK 5000; other City Corporation is 4000 and other areas TK 3000. Tax free income limit for women and more than 65 years citizen is TK 300,000, challenged persons TK 400,000 and wounded freedom fighters TK 425,000.
|Up to TK 250,000||No Tax|
|TK 250,001-TK 650,000||10%|
|TK 650,001- TK 1,150,000||15%|
|TK 1,150,001- TK 1,750,000||20%|
|TK 1,750,001- TK 4,750,000||25%|
|TK 4,750,001- Above||30%|
Readymade Garments: Readymade garments sector is playing a vital role in the economic development and employment generation in Bangladesh. Considering the contribution of this sector in the economic growth and employment generation government has been providing various incentives and tax benefits as withholding tax rate on readymade garments export is currently 0.70 percent and enjoying reduced corporate tax rate of 20%. According to current proposal this sector may enjoy further reduced corporate tax rate to 15% from 20%.
Tax benefit for green factory: In line with environment issues, government proposed to reduce the tax rate of a readymade garments company to 14 percent if the factory of such company has an internationally recognized green building certification.
Core Infrastructure: In order to attract investment in infrastructure, government proposed conditional tax exemption for infrastructure sector such as tolled national highways, expressways, flyovers, elevated and at-grade expressways, subway constructed under public-private partnership (PPP).
Other proposals: For facilitating growth and business and for ease of doing business government proposed to allow a branch office, liaison office or a subsidiary office (including a subsidiary thereof) of a foreign parent company to maintain an income year uniform to its parent company; grant tax exemption to alternative investment fund; and expand the tax exemption list of information and communication technology sector.
Surcharge: Government proposed to maintain minimum surcharge of Taka 3000 if the net wealth exceeds Taka 2 crore and 25 lakh and also proposed to impose a surcharge of 2.5 percent on the income from the business of producing cigarette, bidi, zarda, gul and other tobacco items.
The proposed tax rate for company taxpayers has been presented in the following table:
|Non listed Companies||35%|
|Listed Banks, Insurance and NBFIs||40%|
|Non listed Banks, Insurance and NBFIs||42.5%|
|Listed Mobile phone operators||40%|
|Non listed Mobile phone operators||45%|
Value Added Tax (VAT)
Effective Implementation of VAT Act: The revenue department is fully prepared to implement the Value Added Tax and Supplementary Duty Act, 2012 from 1st of July, 2017. Previously the implementation of this new Act was deferred twice for providing adequate time to the business community to prepare and acquaint themselves with the accounting and record keeping procedures under this new VAT Act.
VAT rate: Finance minister turned down business people’s demand for dropping the Value Added Tax (VAT) rate and declared in his budget speech keeping a single and uniform 15% VAT rate for the next 3 years.
Turnover Tax Exemption Threshold: Government proposed to raise the VAT free annual turnover ceiling from Tk 30 Lakh to Tk 36 Lakh. The firms with this annual turnover will be completely out of the scope of tax. This kind of benefit was not there in the 1991 VAT Act.
In addition, Government proposed to raise threshold for registration under VAT from Tk 80 Lakh to 1 crore 50 Lakh. In other words, businesses having a total yearly turnover up to Tk 1 crore 50 Lakh will be able to avail the opportunity to pay only 4% tax on their turnover.
VAT Exemption: Government proposed to provide VAT exemptions on 536 primary food items such as rice, lentils, fish, meat, vegetables, sugar, honey, puffed rice, maize, wheat, liquid milk, barley, salt etc. same as before. In addition, VAT exemptions are available to 93 items of life saving drugs. Public transport services, public health and medical services, education and training services will also enjoy VAT exemption. Government also proposed VAT exemption for 404 items of the agriculture; livestock and fisheries sector same as before. Furthermore, non commercial activities of charitable and cultural organizations will also enjoy VAT exemption facility.
Other Indirect Tax
Excise duty on Airline Tickets: Revision of existing excise duty on airline tickets as follows except for domestic travels and travel to the SAARC countries which is proposed to keep the same as present:
- Taka 2,000 Excise Duty on airline tickets instead of existing Taka 1,000 for travel to any Asian countries except the SAARC countries;
- Taka 3,000 Excise duty on airline tickets instead of existing Taka 1,500 for travel to Europe, USA and other countries of the world;
- In order to avoid any inconvenience of travelers, this Excise Duty will be collected at the time of purchasing air tickets.
Excise Duty on Bank Account: Government proposed to impose Taka 800 Excise Duty instead of existing Taka 500 in cases where the balance, whether debit or credit exceeds Taka 1 Lakh but does not exceed the limit of Taka 10 Lakh at any point of time during a year. Similarly, Taka 2,500 will be imposed instead of existing Taka 1,500 in cases where the balance exceeds Taka 10 Lakh but does not exceed the limit of Taka 1 crore; Taka 12,000 will be imposed instead of existing Taka 7,500 in cases where the balance exceeds Taka 1 crore but does not exceed the limit of Taka 5 crore and Taka 25,000 will be imposed instead of existing Taka 15,000 in cases where the balance exceeds Taka 5 crore.
Duty and Tax on Cigarette and Bidi: Considering the present scenario, Government proposed to fix the price of the low segment for every 10 sticks of local brand cigarette at Tk. 27 from existing Tk. 23 and increase the Supplementary Duty rate to 52% from existing 50%. At the same time, fix the price of the low segment for every 10 sticks of international brand cigarette at Tk. 35 and the Supplementary Duty rate at 55%.
The existing Supplementary Duty rate for non-filter bidi and filter bidi will remain unchanged at 30% and 35% respectively. These rates will be effective from 1 June 2017.
Currently there is only 10 percent duty applicable on e-cigarette and on its refill pack. For this reason, Government proposed to introduce two separate H.S. Codes for these two items and impose 25% customs duty for both the items along with impose 100% Supplementary Duty on these two items.
Supplementary Duty on fast food: The Government had committed to impose additional taxes on fast food also known as “junk food” considering the health risk. For this reason, Government proposed to impose 10% Supplementary Duty at local supply stage on fast food in addition to applicable 15% VAT.