The revenue board has withdrawn the 2.0-percent advance tax on government procurement of domestic food-grains under food-security contingency plan, as prices stay steep and global supply chains also remain volatile.
As per order of the National Board of Revenue (NBR) the waiver will be valid until June 30, 2023.
The incentive has been offered following a proposal of the Ministry of Food for waiving the taxes on procurement of grains from domestic food stock.
The ministry sought the tax benefit on payment of bills to the rice millers at the government-fixed price.
However, tax experts are sceptical about benefit of the fiscal measure being passed on to growers and consumers in the food-supply chain. From past experiences they said the tax exemption would facilitate the rice millers, neither rice farmers nor consumers.
Earlier, rice millers were supposed to pay 2.0-percent source tax on their bill for supply of food-grains under the food- procurement programme sponsored by the Department of Food.
In a letter to the NBR, the food ministry had pointed out that there was no such tax on food procurement earlier.
On November 10, 2022, the NBR issued a notification to the effect that 2.0-percent tax at source would be deductable as per the Income Tax Rules 1984 at the time of procurement of food-grains under agreement with the local millers.
On November 1, 2022, a meeting chaired by the food minister decided to start procurement of 0.5 million tonnes of parboiled Aman rice in 2022-2023 season from November 17, 2022 at Tk 42 per kilogram. The procurement would continue until end of February.
For domestic procurement of paddy, rice and wheat for storing in government silos, the payment has to be made through Weight Quality and Stock Certificate (WQSC) in advance.
Later, the relevant paying bank's payment is to be cleared through recapitalization of submitted bill including 1.0-percent commission.
WQSC is not a bill, but advance cheque.
Processing charges of paddy and rice are fully exempt from source tax at the time of domestic procurement.
"The food ministry is paying the bills on domestic procurement of grains without source tax deduction," the food ministry letter reads.
A food ministry source said imposition of advance taxes created negative impression among the rice millers, eventually discouraging them.
"Procurement of Aman might be hampered with resultant uncertainty on forming a buffer stock for this situation if this tax existed," he said.
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