NBR mulls 15% VAT exemption on metro tickets

The National Board of Revenue (NBR) is considering the removal of the current 15% value-added tax (VAT) on metro rail tickets amid the country's changing political situation, with the aim to reduce costs for passengers.

NBR officials said the revenue authority's VAT policy wing has already held internal discussions regarding the potential withdrawal. Once they receive approval from the newly appointed NBR chairman, the process will be moved forward through formal channels.

"We are initially considering a VAT exemption on metro rail ticket fares. However, we will present the proposal to the newly appointed chairman. Further official procedures for issuing the exemption order will proceed after receiving his approval," a senior NBR official told The Business Standard, requesting anonymity.

Infographic: TBS

He also said, "We are considering the exemption until next June."

Under the current VAT and Supplementary Duty Act, a 15% VAT is applied to air-conditioned transport services. 

To encourage the use of the transportation system among city residents, Dhaka Mass Rapid Transit Company (DMTCL) requested the NBR to exempt metro tickets from VAT. Following the request, the revenue authority has waived the VAT on metro fares until June 2024.

The NBR did not extend the VAT exemption beyond the deadline and notified the DMTCL of this decision on 4 April. Despite the 15% VAT imposition, the DMTCL chose not to pass this cost on to metro passengers.

During the period, the relevant ministry and the DMTCL exchanged several letters with the NBR, seeking the withdrawal of the VAT. However, the then NBR chairman, Abu Hena Md Rahmatul Muneem, didn't respond.

An NBR official said that after a 15% VAT imposition, the minimum distance ticket price will be Tk23, up from Tk20 currently, while the maximum distance ticket price will be Tk115, up from Tk100. 

In an inter-ministerial meeting on 4 July, DMTCL authority requested a deferral of VAT on fares until 2032, DMTCL Managing Director MAN Siddique requested that no VAT be imposed on metro rail services until 2032, highlighting the complications of collecting VAT. 

The DMTCL authority said the VAT amount would need to be added to the current fare to collect this VAT. But the existing ticket machines, worth Tk1 crore each, are not equipped to handle this and replacing them would be both expensive and time-consuming.

Despite efforts to contact DMTCL Managing Director MAN Siddique by phone on Monday, TBS was unable to reach him.

Since April 2023, the metro rail has been operational for passengers. According to the authority, the metro rail runs 196 times daily from 7:10am to 10:14pm, serving approximately 300,000 passengers. It saves the public Tk8.38 crore each day in travel time costs and Tk1.18 crore daily in vehicle operation costs.

The metro rail service has been halted since July 20 due to vandalism at Mirpur-10 and Kazipara stations during the students' protests demanding reforms to the quota system for government jobs.

However, Muhammad Fouzul Kabir Khan, the newly appointed adviser to the Road Transport and Bridges Ministry, announced on Sunday that plans are in place to resume service within seven days.