Government's revenue authority moves to look into some key factors like payment of subcontracting bills in foreign currencies over apparel exporters' plea for VAT waiver.
The value-added tax (VAT) policy wing under the National Board of Revenue (NBR) would also review whether there is any scope to consider subcontracting output as export.
In an official note to the customs bond wing, the VAT-policy section sought to know where an export-oriented industry having bonded- warehouse licence is allowed to supply product through subcontract as per law.
The VAT wing started the scrutiny following a demand placed by Bangladesh Garment Manufacturers and Exporters Association (BGMEA) on November 11, 2011.
In a pre-budget meeting with the NBR earlier, the BGMEA leaders had said one-third of the subcontracting companies are in financial distress due to taxes and VAT on their bills.
Officials say the NBR is positively considering the VAT-exemption plea that might take place in the next budget if the NBR got consent of government high-ups.
Bangladesh Knitwear Manufactures and Exporters Association (BKMEA) Executive President Mohammad Hatem says it's a common practice of some export-oriented industries to subcontract between each other to meet emergency requirement of fabrics.
"Imposition of VAT taxes is unjust on subcontracting bill," he says.
Apparel exporters have requested the NBR to waive the VAT as some industries are surviving through subcontracting services, he adds to underpin their plea.
During the last three or four months, the VAT officials are imposing pressure of VAT and Advance Income Tax (AIT) on exporters on subcontracting, he mentioned.
"It is unfortunate that most of such taxes are imposed without discussing it with us, and suddenly we identified new tax burden," he rues.
Mr Hatem alleged harassment by field-level officials while transporting fabrics distrusting shipment of export products.
Talking to the FE, a senior VAT official said export-oriented industries having bonded-warehouse licence are exempted from payment of VAT and taxes.
"If one bonded industry avails subcontracting services from other bonded ones, then VAT on its bill may not be logical," he adds.
According to BGMEA, some 600-700 factories are currently doing subcontracting and contributing about US$5.0-6.0 billion in export earnings.
