Budget offers challenge to NBR; new Income Tax law gives way out

Out of the total budget of Tk761,785 crore, the National Board of Revenue (NBR) is expected to collect Tk430,000 crore.

As of March 2023, the NBR collected Tk234,514 crore of the target Tk370,000 crore. This seems pretty ambitious, but once the new Income Tax law will be placed in the parliament, we will get to know the specific steps to be taken to collect the targeted revenue from direct tax.

The new tax law is expected to create a more streamlined and progressive tax system in the country. It is expected that the new tax law will reduce the discretionary power of the authority keeping alignment with the accounting standard in terms of tax admissible expenses, smoothen the audit process, refund and reduce cost of doing business in Bangladesh.

Keeping in mind the inflation impact in the economy, the tax-free income threshold for the general taxpayer has been proposed to be increased by Tk50,000 in the initial limit for tax exempt income. Surcharge applicability limit has been increased to Tk4 crore from Tk3 crore. Such reduction will give some relief to middle-class taxpayers and will also encourage the taxpayer to be more compliant.

However, for the individuals filing tax returns with no taxable income, they will suffer from a minimum tax burden of Tk 2,000, which requires reconsideration.

The corporate tax rate this time remains unchanged without rationalising cash transaction limit. Environmental surcharge has been proposed in case of owning multiple motor cars.

In terms of indirect tax, new guidelines will be published regarding online sales through which the online business might get a huge relief from VAT payment on the whole receipts. Now invoices for electricity bills issued by banks and digital payment gateway institutions will be considered as VAT invoices.

Software manufacturers will now have to pay VAT at 5%. The local cylinder manufacturers will face an increased VAT rate from 5% to 7.5% at the production stage.

The price of mobile phones in the domestic market will be increased as VAT rate will be increased on mobile phone manufacturer and assembler at the local stage.

Moreover, the price of necessary household appliances is expected to rise due to which the consumer will have to face price hike. Existing VAT exemption facilities have been extended for the local producers of refrigerators and freezers and other household electronic items.

Going forward, an importer is required to submit an ex-bond bill if the goods are cleared for home consumption. To protect the local industry, TTI on import of shelled cashew nuts has been changed to 43% from 15.25%.

Moreover, importation of processed nuts and fruits will be subject to 20% SD and fresh and dried dates will be subject to 25% customs duty (CD) and 15% VAT at import stage. The supplementary duty (SD) on tobacco products has been increased to 150%, whereas import of escalators and elevators will be subject to a duty of 15% from 1%.

Snehasish Barua, FCA, Director – SMAC Advisory Services Ltd

BUDGET FY2024 / Income tax law