Revenue board exempts BSC from VAT on buying six Chinese ships

Doulot Akter Mala | Published: November 08, 2018 11:36:28 | Updated: November 09, 2018 15:02:56

The National Board of Revenue (NBR) has exempted the Bangladesh Shipping Corporation (BSC) from paying Value Added Tax (VAT) on account of its purchase of six new ocean-going ships.

Otherwise, the corporation would be required to pay VAT at a rate of 15 per cent on the purchase value of the ships.

NBR's VAT Policy Wing, in six separate letters, dated November 4, addressed to the BSC secretary, allowed the organisation to enjoy the VAT exemption.

NBR officials said the government has offered incentives amounting to Tk 4.0 billion to the BSC in the form of VAT exemption.

According to an agreement with China, the BSC will import the six ocean-going ships from the former. Of the vessels, three are oil tankers and the rest are freighters.

However, the NBR has tagged some conditions against VAT exemption facility. The ships will not be older than 22 years and should have the capacity of more than 5,000 deadweight tonnage (DWT).

A senior official of NBR said VAT Policy Wing has scrutinised the BSC-submitted documents regarding the ships before allowing the exemption.

"We have found all of the six ships complied with the conditions, and are entitled to enjoy the tax exemption," he said.

Each of the vessels capacity is around 39,000 DWT. Jiangsu New Yangzi Shipbuilding Co Ltd of China is building the ships.

The BSC is purchasing these vessels at a cost of Tk 18.43 billion with concessional financial support from China. A loan agreement for procuring the ships was signed during Chinese President Xi Jinping's visit to Bangladesh in 2016.

The vessels have been named as Banglar Joyjatra, Banglar Samriddhi, Banglar Arjan, Banglar Agrajatra, Banglar Agradoot and Banglar Agragoti.

"We have already taken delivery of two ships. One was pressed into service in July last and the other last month," Mohammad Yousuf, BSC director (technical and commercial), told the FE on Tuesday.

The remaining four ships are scheduled to be delivered between this month and February next, he added.

The BSC ended up selling 36 vessels after incurring loss during the last few years. It had only three national flag carriers before the acquisition of the latest Chinese vessels.

The NBR had withdrawn tax exemption facility on import of ocean-going ships in fiscal year (FY) 2014-15. Following the measure, the NBR had received Tk 1.60 billion VAT against import of ships during the last three years.

However, the number of ocean-going ships dropped by 67 per cent during the period.

The NBR reintroduced the VAT exemption facility for ocean-going ships on June 19, 2018 attaching some conditions. Ship importers are required to furnish relevant documents with proof of compliance with the NBR conditions for obtaining the exemption.

The import of oceangoing ships, both in public and private sectors, declined significantly in the last three FYs.

In FY 2013-14, there were 11 state-owned and 52 private oceangoing ships, but the number dropped to three and 35 respectively in FY 2016-17. Also, the total carrying capacity of national flag carriers reduced from 18,62,223 DWT to 15,273,666 DWT in that period.

In a note on an application submitted earlier by the Bangladesh Oceangoing Ship Owners Association to facilitate import of ships, Finance Minister A M A Muhith had instructed NBR to review the matter.

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