VAT from large firms rises 21% in 5 months

The National Board of Revenue (NBR) has reported a 21% year-on-year rise in VAT collection from large companies in the first five months of the fiscal 2023-24, thanks to price hike in gas and tariff increase in tobacco, which resulted in higher sales prices and, consequently, more VAT collected.

Officials concerned said the NBR's Large Taxpayers Unit (LTU-VAT) collected around Tk26,000 crore in the first five months of FY24, an increase of more than Tk5,000 crore; two sectors –  gas and tobacco – contributed TK3,000 crore.

VAT collection from the gas sector during the period increased by 105% on the back of gas price hike by up to 187% in February 2023.

Md Abdul Rashid Mia, additional commissioner and spokesperson of LTU-VAT, told The Business Standard, "There has been a big jump in collection due to increased gas prices. Besides, the tariff level of cigarettes has been increased in the last budget. Cigarette sales have fallen in five months. But price adjustment at various levels is one of the reasons for growth in the sector."

Humayun Kabir Khan, deputy general manager of Titas Gas Transmission and Distribution Company Limited, told TBS, "Last February, the price of gas was hiked as high as three times. This is the main reason behind the huge growth in VAT collection on the gas sector."

VAT collection from the mobile phone sector saw a 22% year-on-year growth to Tk805 crore during the five-month period. Representatives of the phone companies say in some cases the prices have increased due to changes in their products (talk time or internet packages). However, VAT payment increased mainly for clearing of pending dues during the period, they say.

A top official of a mobile phone company, who preferred not to be named, told TBS, The business of mobile phone companies fell significantly in the first half of the fiscal year. But the 22% VAT growth from the sector happened mainly due to the resolution of some disputes."

People of the country have been experiencing high inflation for the past year which hovered around 10% in August, the highest in the last 12 years, and was still above 9% in November as per the latest data. Experts say the NBR generated additional revenue as the government hiked gas prices in addition to tariff rise on cigarettes.

SM Nazer Hossain, vice president of the Consumer Association of Bangladesh, a consumer rights platform, told TBS, "Any increase in indirect tax or tariff value is passed on by traders to the consumers. VAT collection increase from sectors like gas indicates additional pressure on the consumers who are already facing high inflation."

He also said, "We have been campaigning for a long time to reduce indirect taxes. But the government is not paying heed to our demand, rather it is going in the opposite direction."

According to LTU-VAT data, 110 large companies paid Tk26,000 crore in VAT during the July-November period of FY24, which is more than half of the total VAT collected. Of the amount, more than half – about Tk13,000 crore – came from the British American Tobacco Bangladesh Limited alone.

In the last national budget, the government increased the tariff value to some other levels including the lower tier cigarettes. Besides, supplementary duty was increased, which triggered VAT collection by 14% despite the decrease in overall sales.

The official data also shows among the top 10 VAT paying sectors, VAT collection from beverage and soap declined during the said period. The growth in revenue from the cement sector is small.

Professor Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue, told TBS, "Tariff hike decision on tobacco products was appropriate. But the NBR has to put more focus on controlling tax dodging."