Shop owners demand VAT exemption for up to Tk50 lakh in turnover

The Bangladesh Shop Business Owners' Association has urged the interim government to raise the VAT exemption threshold for turnovers to Tk50 lakh, rejecting the recent reduction to Tk30 lakh by the administration.  

"The current government has issued a gazette exempting turnovers up to Tk30 lakh from VAT, and we reject this decision," said Md Nazmul Hasan Mahmud, president of the association, on Tuesday (28 January) at a press conference held at the Dhaka Reporters Unity. 

The National Board of Revenue (NBR) recently revised the threshold as part of an initiative to bring small businesses under the VAT net. However, shop owners argue that this will disproportionately burden them.  

"We demand that all increased VAT on products be withdrawn, and the exemption limit be kept at Tk50 lakh for shops in city corporations, municipalities, and shopping malls, ensuring this is implemented for all shops," Nazmul Hasan Mahmud added.

He also alleged harassment by NBR officials, claiming, "Some officials take money under the table during VAT collection. For instance, they collect Tk500 in VAT from a shop for the government treasury but take Tk1,000 under the table. This deprives the government of revenue."  

He further said, "We propose that VAT be collected at the production or import stage by setting an MRP (maximum retail price) for every product. This would free shop owners and consumers from harassment in the name of VAT.  

"With 70 lakh shop owners contributing the second-highest share to GDP and providing jobs to nearly 2 crore people, we are not opposed to paying VAT but seek a simpler process," he added. 

The president added that if a fixed VAT rate is established, shop owners are prepared to comply. 

However, the current VAT law requires maintaining five separate records, which is impractical for small shop owners. 

Complying would mean hiring additional staff or a lawyer, which is costly, he said. 

"It is already difficult for us to survive in the current situation. Increasing VAT will make it almost impossible for small shop owners to continue their businesses," he said.   

The association also pointed out that due to the increase in interest rates, small shop owners are on the verge of becoming loan defaulters. 

They demanded the government waive interest on loans for affected shop owners and issue a gazette allowing one-time loan repayment with a 1% down payment over a 15-year period.

He further said, "Our demand is to include retail businesses under the category of small and medium enterprises (SMEs). Since we are not classified as SMEs, we were unable to access the easy loans provided during the pandemic."

In response to a question, Nazmul Hasan said, "Sales are already low, and with little to no business, many shops are struggling or closing down. 

"On top of that, the added burden of VAT and taxes has made our situation worse. We are holding on with the hope that things will improve in the future. But what else can we do? This is the only trade we know."

At the press conference, the association's members also mentioned that small shop owners typically earn five to six times their average monthly sales during the month of Eid-ul-Fitr. However, some unscrupulous VAT officials exploit this peak season under the guise of VAT inspections, harassing shopkeepers.  

"We, therefore, demand that VAT inspections be conducted during any month other than the month of Eid-ul-Fitr [month of Ramadan]," they added.