Many businesses are suffering from cash flow problem as a large sum of their capital remains blocked as the process of getting refund of the Advance Tax (AT) they paid at the import stage is exceedingly difficult.
The refund claim made to the National Board of Revenue (NBR) reached as much as Tk 22.35 billion against 687 applications of the companies until November 30, 2020.
Large steel sector players said they are facing difficulties in operating business smoothly as their capital got stuck without the refund.
The BSRM, one of the largest steel makers of the country, said the income tax and VAT departments will need to return Tk 4.19 billion while another Tk 2.69 billion is outstanding against actual refunds accepted by the tax department.
Talking to the FE, the BSRM group chairman Alihussain Akberali said the five per cent upfront tax on the steel industry at the import stage is prohibitive and it creates a permanent refund as the output tax is lower than that of the rate.
He said a huge working capital of the group has remained stuck, creating cash flow problems not only for his company, but the whole industry.
"Dealing with the government offices is difficult and regularly a lot of our time is being spent on handling these issues, which puts a lot of strains on our management and also our finances," he said in a letter to the NBR.
The BSRM said the group alone has a pending refund worth Tk 933.3 million as AT since July 2019.
In the letter, the Mr Akberali recommended reducing the advance tax at the import stage to 2.0 per cent from exiting 5.0 per cent and removing VAT deduction at source from selling billets from the company to other making rods.
"We are already paying VAT on selling of billets to our own rolling mill and also selling rods to customers so this additional deduction at source of VAT is blocking our working capital and refund lies pending for a long time," he wrote in the letter.
General secretary of the Bangladesh Steel Mills Owners Association and managing director of Chakda Steel Re-rolling Mills Limited, in a recent letter to the NBR, also drew the attention of the high-ups seeking redress.
He said such a refund claim has been causing capital liabilities, escalating business operations cost, time and harassment.
The association leader requested the NBR to scarp the Statutory Regulatory Order regarding AT immediately to salvage the manufacturing companies.
Manzur Ahmed, trade expert and adviser of the iron and steel association groups, said the AT rule-2020 contradicts the provision of the VAT law.
It is an unnecessary measure that blocks revenue and creates barriers to smooth business operation, he said.
Small and medium scale businesses find it difficult to understand the law and are even unable to claim the refund, he said.
Ultimately, consumers are bearing the brunt of high prices of commodities for such provisions in the law, he added.
Responding on the allegation, Tasmina Hussain Luna, commissioner of the Dhaka (East) said they have started issuing the VAT refund after resolving complexities over getting cheque book from the accountant general's office.
"I have resolved 19 refund applications in recent times out of 46 companies," she said.
She said the process of issuing refund needs some time as the VAT officials have to agree to the undisputed claim of the businesses.
Another senior official of VAT wing expressed the hope that the complexities over issuing VAT refund would be resolved by January.
He said tax commissioners were hesitant about giving the refund from the public exchequer initially as the provision of the law is new.
Another VAT official said the complexities over the issuance of refund to the industries having low tax rate than that of refund claim would be resolved in the next fiscal year.