The Padma Rail Link project authority has sought exemption from Value Added Tax (VAT) for its contractors, subcontractors, suppliers and agents due to insufficient fund for payment of taxes, officials said.
They said the Revised Development Project Proposal (RDPP) doesn't have enough fund to pay VAT on behalf of the contractors.
The project high-ups have sought waiver on some 13 local services availed by the contractors.
Referring to the Rooppur Nuclear Power Plant project, they said the rail link project is one of the fast-track projects of the government.
Earlier, the government offered such VAT exemption benefits to the Rooppur Nuclear Power Plant project as it is another fast-track project.
In a recent letter sent to the National Board of Revenue (NBR), Project Director (PD) of the Padma Rail Link project Golam Fakhruddin Ahmed Chowdhury sought VAT exemption.
In the letter, he wrote that China Railway Group Limited (CRGL), the contractor of the project, has to deduct VAT at source at the time of payment to the subcontractors and suppliers.
It has to pay the amount before completion of services.
"The company will be able to adjust the amount of VAT after completion of services. It would claim paid VAT from the government," the letter reads.
As per article 6.3 of the contract signed with China, the government is liable to shoulder all payable VAT on behalf of the project contractors.
"So far, there is no enough fund in the approved RDPP to repay the amount of VAT to the Chinese company," Mr Chowdhury added.
He also wrote that the project is interrelated with the Padma Multipurpose Bridge and is one of the most priority projects of the government.
In June last, the NBR exempted VAT on those 13 services of the Rooppur Nuclear Power Plant.
Mr Chowdhury has sought VAT exemptions on similar services.
The 13 services include port, construction company, motor car garage and workshop, internet, freight forwarders, clearing and forwarding agents, furniture producers, insurance company, mending company, consultancy firm, supervisory firm, suppliers, security services, transportation contractors and subcontractors (except petroleum products), engineering firm, banking services (only for opening Letters of Credit for that project), human resources suppliers and management company and information and communications technology (ICT).
The Bangladesh Railway (BR) is implementing the Padma Rail Link project under a US$ 3.13 billion commercial contract signed with China in August 2016.
Under the project, a 225-kilometre rail link is expected to be established on both sides of the Padma Bridge by June 2022.
The project cost is around Tk 350 billion that aimed to build rail link with nine southern districts.
However, NBR officials said they are yet to take any decision on VAT exemption for the contractors of the project.
As per government's order, all the development project proposals should include the amount of payable VAT and taxes with the estimated project costs.
In case of offering any VAT or tax exemptions in any contract, the entities concerned of the government need to obtain approval from the NBR, tax officials said.
A cabinet committee on purchase in 2017 approved Tk 29.03 billion in taxes and duties from the Padma Rail Link project that will go straight to the NBR.
When contacted over phone, the project director declined to comment on the issue.