The National Board of Revenue (NBR) has moved to frame a special VAT payment policy for the sales and marketing of imported reconditioned vehicles in order to resolve complexities relating to fiscal measures.
The VAT policy wing of the NBR recently formed a five-member committee to scrutinise the matter.
The committee, headed by first secretary of VAT policy wing Kazi Farid Uddin, will submit a report in this regard by April 15 next.
Talking to the FE, a senior official of the VAT wing, said they had formed the committee following a proposal from the Bangladesh Reconditioned Vehicles Importers and Dealers Association (BARVIDA).
"We have found a number of proposals of the association that need scrutiny. The committee will review those and frame fiscal measures for upcoming budget according to the report of the committee," he said.
Issues to be examined include advance tax on reconditioned vehicle importers, and specific guidelines for the imposition of tax for the dealers who do not import directly.
Reconditioned vehicle importers alleged that they had to pay Advance Tax (AT) at import stage and also VAT at business stage but their value addition after import was not that much higher.
They proposed to consider AT as the final tax liability of the importers and withdraw VAT at the business stage of reconditioned vehicles.
They alleged that they had to face problems adjusting the AT with the actual payable VAT.
"We will review how field level VAT offices are collecting the VAT from the importers and dealers. A guideline might be issued with the policy to collect VAT from them," the VAT official said.
In some cases, the dealers have to pay 'tax on tax' as VAT is imposed on total value of the imported reconditioned vehicle, he said.
BARVIDA, on March 2 this year, submitted their budget proposals for the fiscal year 2021-22 to the NBR.
Talking to the FE, BARVIDA president Abdul Huq said motor vehicle sector is a classified trade in the developed world and commercial imports of motor vehicles for sales and distribution is a long established trade sector in Bangladesh.
"Unfortunately, there is no separate motor vehicle dealers' Act. Mismatch remains in fixation of 'customs valuation' of imported reconditioned motor vehicles for the imposition of duty-taxes," he said.
Some problems occur when the VAT authority collects revenue at the local stage, he said.
"We have persuaded the NBR to identify this issue and resolve for a better solution which should be trade and revenue friendly," he said.
In the budget proposal, the association said the sector faced a blow during the last two/three years due to the faulty policy of the government.
Businessmen are incurring losses due to a drop in imports and sales of reconditioned vehicles and the availability of sub-standard imported new vehicles at lower prices than that of reconditioned vehicles.
They requested the NBR to re-fix the rate of depreciation of reconditioned cars, determine the definition of reconditioned vehicles, amend the year calculation methods, provide a tax benefit for electric vehicles, and reduce import duty on public transport.
The BARVIDA also proposed to exclude the reconditioned vehicles from the list of luxurious goods.
