Tableware, kitchenware to be costlier; sweets to enjoy lower VAT

Plastic and aluminium-made table and cookware, among others, are likely to be costlier for an increase in taxes in the next fiscal year while sweet-makers can enjoy lower value-added tax (VAT), according to finance ministry officials involved in formulating the upcoming budget. 

The officials, wishing to remain unnamed, told The Business Standard that the government is going to hike VAT on polypropylene staple fibre, plastic tableware and kitchenware, aluminium kitchenware, tissue papers and ballpoint pens as these industries enjoyed tax facilities and gained strength over the past few years.

Currently, polypropylene staple fibre manufacturers are enjoying VAT waiver but the upcoming budget may impose 5% VAT at the production stage, while VAT on local plastic tableware and kitchenware, aluminium kitchenware and tissue papers is set to increase to 7.5% from the existing 5%. Local ballpoint pen manufacturers may face the highest rate of VAT at 15%.

In contrast, the government is considering reducing VAT on sweets to half, 7.5%, officials added. Besides, handmade cake and biscuits producers are likely to continue enjoying lower VAT as the government is considering an extension of VAT waiver to them amid raw materials price hikes.

"The government has pressure to collect higher revenue to keep the momentum of the country's development. At the same time, it must consider individual business situations. So, taxes are increasing on the industries which have already gained a minimum capacity and facilities are being extended for those which are really struggling for raw material price hikes or uneven competition," a senior ministry official told TBS.

Polypropylene staple fibre industry insiders said the fibre is used to manufacture air filters, water filters, and other industrial fabrics. It is also used in woven carpets, non-woven carpets, upholstery, carpet backing, yarns and geotextiles. Hence, the imposition of VAT will increase the prices of many products.

Tissue paper producers said the demand for tissue paper has been on the rapid rise over the last decade thanks to an increase in per capita income and rapid urbanisation. Its market size is now Tk500 crore per annum. Of the total demand for tissue paper in the country, 95% is met by local companies and the remaining 5% is imported. Tissue paper and hygiene products are also being exported to around 23 countries.