Staff Correspondent:

Jawad Tajwar bought some clothes from a branded clothing store in Uttara, the capital, last Friday. The total price was Tk 1,577, but he ended up paying Tk 1,734 due to an additional Tk 157 charged as Value Added Tax (VAT).

On 9 January, the government increased the VAT rate on both branded and non-branded clothing from 7.5 per cent to 15 per cent. However, following demands from traders, the rate was later reduced to 10 per cent for branded clothing, while the VAT on non-branded clothing remained unchanged at 7.5 per cent.

As a result, an additional 2.5 per cent VAT was imposed on branded clothing. This meant that Jawad Tajwar had to pay an extra Tk 39 when purchasing his clothes.

Soumik Das, former vice president of Fashion Udyog, an association of domestic clothing brand entrepreneurs, told that the implementation of the new VAT rate has further reduced sales. Consumers had already cut back on clothing purchases due to high inflation.

The government’s revised VAT structure has also raised concerns about price increases for various goods and services, including imported fruits, tissues, cooking gas, sweets, biscuits, fruit juices, soft drinks, tomato ketchup, paints, movie tickets, and spectacle frames.

Additional VAT has already been collected in several sectors. In some cases, new product consignments have yet to enter the market, but traders warned that prices will rise once they do. Some businesses are still negotiating with the National Board of Revenue (NBR), hoping that the additional VAT will be withdrawn.

“Due to the increase in duty and VAT, a 5-taka biscuit will now cost 7 taka, a 10-taka biscuit will rise to 13 taka, a 20-taka juice will cost 25 taka, and a 25-taka juice will increase to 33 taka,” said PRAN-RFL Group Chairman Ahsan Khan Chowdhury.

For instance, VAT on products such as machine-made biscuits, cakes, pickles, chutneys, tomato paste, tomato ketchup, and tomato sauce—as well as processed mango, pineapple, guava, and banana pulp—has increased from 5 per cent to 15 per cent. Additionally, the supplementary duty on fruit juices and fruit drinks has risen from 10 per cent to 15 per cent.

Entrepreneurs in this sector met with the NBR on 23 January. Following the meeting, PRAN-RFL Group Chairman Ahsan Khan Chowdhury told reporters, “Due to the increase in duty and VAT, a 5-taka biscuit will now cost 7 taka, a 10-taka biscuit will rise to 13 taka, a 20-taka juice will cost 25 taka, and a 25-taka juice will increase to 33 taka.”

Speaking to this correspondent on Saturday, he added, “Although VAT has increased, we have not yet raised our prices. For now, our company is absorbing the additional VAT costs as a subsidy. We remain hopeful that the government will reconsider and remove this financial burden on consumers. Therefore, we plan to wait another week before making any price adjustments.”

On 9 January, the government increased VAT and supplementary duties on more than 100 goods and services.

However, following public criticism, on 22 January, the VAT on eight types of goods and services—including medicines, mobile phone calls, internet usage, restaurant food, clothing, sweets, non-AC hotels, and motor vehicle garages and workshops—was either returned to its previous level or slightly reduced.

Nevertheless, the VAT and supplementary duty on the remaining products remained unchanged.

The government had aimed to generate an additional Tk 120 billion in revenue through these tax hikes. Government advisers argued that the increased taxes would not significantly burden consumers, as many essential daily goods had already been exempted from duty and tax.

“Now, I can only afford to buy fruit for my children. I can’t eat it myself. There’s no choice but to cut back further,” said Elias Hossain, a Mirpur resident.

However, economists countered that raising taxes amid high inflation was ill-timed and that the government should have waited until the next budget. They also emphasised the need to enhance revenue collection by increasing taxes on the wealthy instead.

FRUIT PRICES INCREASES

Various fruits, including imported apples, pears, oranges, and grapes, were already subject to high rates of duty and tax. On 9 January, the government further increased the supplementary duty on fruit imports from 20 per cent to 30 per cent.

According to sources at Chattogram Port and fruit importers, this tax hike has significantly raised import costs. For instance, the total duty and tax on each kilogram of imported oranges has increased from Tk 101-102 to Tk 116-117 per kg.

Over the past few days, fruit prices have noticeably risen in various markets across the capital.

GOVT SLASHES VAT ON MOBILE SERVICES, RESTAURANTS, CLOTHING, MEDICINE

Maqbul Hossain, a street vendor selling fruits and vegetables under the metro rail station on Topkhana Road in Dhaka, told   that the wholesale price of a 14-kg carton of oranges has surged by Tk 200 in just two weeks. As a result, he is now selling oranges at Tk 320 per kg at the retail level, an increase of Tk 20 per kg.

Elias Hossain, a Mirpur resident bargaining at Maqbul Hossain’s shop, expressed his frustration: “Now, I can only afford to buy fruit for my children. I can’t eat it myself. There’s no choice but to cut back further.”

WHY WAS VAT RAISED SUDDENLY, WHAT IS THE STATE OF ECONOMY

According to NBR data, 1,696 tonnes of oranges were imported in the two weeks following the duty increase, generating Tk 196.8 million in government revenue. The additional customs duty has contributed an extra Tk 250 million in revenue.

Similarly, the customs duty on raisins was Tk 291 per kg before the increase. After the higher supplementary duty took effect, 200 tonnes of raisins were released, raising the customs duty to Tk 333 per kg—an increase of Tk 42 per kg.

PAINT PRICE RISES BY 4-5PC

This time, the government has raised supplementary duty on paints at the supply level to 10 per cent from existing 5 per cent, increasing the tax burden on local colour producers. The producers implemented a new price at the retail level from Sunday, with a 4-5 per cent inflated rate on average.

A visit to paint shops at Karwan Bazar shows price of a 3.6-litre jar of a well-known paint brand is being sold at Tk 1,900, Tk 100 more than previous price.

Saddam Paint and Hardware manager Md Shihab told   escalated price of the paints hit the market two days ago.

Meanwhile, the Bangladesh Energy Regulatory Commission (BERC) has raised the price of 12-kg LPG cylinders by Tk 4 on 14 January. Currently, the cylinder price is Tk 1,459.

However, there are allegations that no one abide by the BERC price. Instead, they charge more money; now they have been charging more money from the consumers showing the excuse of added VAT rate.

Golam Hakkani, an LPG supplier in Halishahar of Chattogram, told   the price of LPG is different from one to another company. Some of the companies have raised the cylinder price by Tk 50, grabbing this opportunity.

PRICES TO BE RAISED SOON

The VAT rate has been set to 15 per cent from existing 5 per cent on plastic-made spectacle frames, metal frames and same kind of products.

No new supply of the goods hit the market when this correspondent visited the spectacle shops at Akram Tower in the city’s Bijoynagar area on Sunday.

Md Maruf, owner of King Opticles at the shopping mall, said, “The lowest price of a frame at my shop is Tk 600. It will cost another Tk 50 if the added VAT Is imposed.”

Traders said the prices of cinema tickets, tissue papers, cost at tailors and other goods and services are likely to be costlier soon.

INDIRECT EFFECT

Additional duty and tax on raw materials for industries and turnover tax could hike prices of goods. VAT has been increased for goods like various equipment of ispat industries, electric transformers, rubber processing oil and bitumen and so on.

Additional duty and tax on those goods will affect the price in an indirect way, traders said.

Meanwhile, the inclusion ceiling for turnover tax has been decreased to Tk 3 million from previous Tk 5 million. This means, those who sells goods of that amount will come under the tax net.

Their turnover tax rate for sales up to Tk 5 million is 4 per cent.

Research director at Centre for Policy Dialogue (CPD), a private research organisation, Khondaker Golam Moazzem told   that this increase of VAT rate has been affecting the lifestyle of lower middle class and middle class people in the cities.

He warned that inflation rate for non-food item goods could further spike.

According to him, the government has opted for an easier path to collect revenue but has been, in a certain way, giving exemption to those who have been evading the tax.

“The emphasis should be on increasing the collection from direct tax to boost the revenue. But we don’t see such initiatives from this interim government though people expect such strict policies from this type of government than a political government,” Khondaker Golam Moazzem stated.