Importers and manufacturers may get value-added tax waiver on import and manufacturing of oceangoing large ships having capacity above 5,000 DWT to make the sector vibrant, officials of the National Board of Revenue said.
They said that stakeholders including different government offices, operators and manufacturers at a recent meeting with the NBR opined that withdrawal of the existing 15 per cent VAT on the sector would boost the business.
The revenue board will soon send a summary containing opinions of the stakeholders and a comparative analysis on the sector to finance minister Abul Maal Abdul Muhith for his decision.
The move was taken at the meeting held on January 25 with NBR chairman Md Mosharraf Hossain Bhuiyan in the chair following an application of the Bangladesh Oceangoing Ship Owners Association seeking exemption of VAT and other taxes imposed on import of large bulk and container ships.
Muhith also instructed the NBR to examine the situation and send a report.
Officials and industry insiders said that there was VAT exemption facility for import of oceangoing ships before the fiscal year of 2014-2015.
The number of national flag-carrying large vessels sharply declined to 38 including state-owned three ships in last year from 63 including state-owned 11 vessels in 2014 after the NBR withdrew the benefit in FY15, they said.
According to a situation paper of the NBR, the volume of country’s international trade was $77 billion in the FY 2016-2017.
The country spent minimum $7.7 billion as freight charge at the average 10 per cent rate for carrying goods in the year, it said.
At the NBR meeting, BOSOA vice-president Sk Bashir Uddin said that the national flag-carrying vessels operated by local oceangoing ship operators earned only on an average $150 million a year by carrying less than 5 per cent of the total export-import goods.
There are international norms that allow the national flag-carrying vessels to carry at least 50 per cent of the total trade volume.
But the country cannot take the opportunity due to the shortage of vessels having higher DWT, he said.
DTW or deadweight tonnage is a measure of how much weight, excluding its weight, a ship can carry.
He said that the local operators could earn some few billion dollars from the sector if they would get support from the government by exempting the sector from paying the taxes.
He said that the local operators were lagging behind their peers in the neighbouring countries like India, Pakistan and Myanmar in the business due to the existing higher taxes while the operators in the neighbouring countries were enjoying tax exemption.
Operators are not making any new investment in the sector due to high cost of import, industry insiders said, adding that they also needed to replace the older ships to avoid higher maintenance cost.
The total tax incidence stands nearly at 27 per cent including 15 per cent VAT and 5 per cent advance income tax, which makes the investment less competitive in the high capital-intensive business, industry insiders said.
Association of Export Oriented Ship Building Industries of Bangladesh president Abdullahel Bari said that the local manufacturers could build oceangoing ships with capacity above 5,000 DTW.
So, VAT waiver on import of such ships will not hamper the local industry, he said.
Officials of the NBR said that in last three years the revenue board got only Tk 160 crore from the sector by withdrawing the tax benefit, which (the amount) was very insignificant considering the prospect of the sector.
They said that the NBR would take its next step regarding reinstating the tax benefit once the finance minister takes a decision in this regard.
Source: New Age.