Local industries would enjoy tax benefit until 2021 on import of raw materials and spare parts for manufacturing compressors.
The VAT wing of the National Board of Revenue (NBR) issued two separate Statutory Regulatory Orders (SROs) in this regard on October 21, 2018.
Through those SROs, the NBR has offered exemption from payment of Value Added Tax (VAT) and Supplementary Duty (SD) to facilitate local manufacturers of air conditioners, refrigerators and freezers.
The NBR also exempted local manufacturers from paying 15 per cent VAT on production of compressors.
There were 15 per cent VAT and up to 45 per cent SD on import of spare parts and raw materials by compressor manufacturers. Tax incidence was around 67 per cent on the items including 25 per cent Customs Duty (CD).
However, 25 per cent CD on the items would remain unchanged.
In another SRO, the NBR also extended the existing VAT and SD exemption on import of raw materials and equipment to manufacture air conditioner (AC), refrigerator and freezer and its production up to June 2021. The facility was scheduled to expire in June 2019.
In July 2017, the NBR offered tax benefit to AC, refrigerator and freezer manufacturers.
A senior VAT official said the compressor manufacturers were excluded from enjoying tax benefit, although they are part of production of AC, refrigerator and freezer.
"The NBR offered the facility to help develop import substitute industries. Local industries fully depended on imported compressors," he said.
Currently, some local industries are manufacturing compressors, he added.
Officials said tax benefit has been offered after scrutinising the proposals put forward by Bangladesh Refrigerator Manufacturers and Exporters Association.
To avail the tax benefit, local compressor manufacturers have to comply with some conditions including having some machinery in their industry premises.
Manufacturers will require to have sand moulding machine, induction melting furnace, heat treatment furnace, spectrometer, upper cover press machine, lower cover press machine, crankshaft grinding line, lamination annealing furnace, dip phosphating line, rotor line, life testing machine, hemi-anechoic chamber, CNC coordinate measuring machine and calorimeter, the order said.
The manufacturers will have to be VAT-registered company and have registration with the Bangladesh Investment Development Authority (BIDA).
A manufacturer will have to add 30 per cent value-addition to the production process of the items.
They will also have to maintain books of record and submit VAT returns regularly for availing the benefit.
Currently, Walton Hi-Tech Company has started manufacturing compressors for AC, refrigerator and freezer.
Also, local manufacturers Marcel, Minister and Jamuna are assembling AC, refrigerator and freezer.
