AIT exemption on capital machinery import to widen

Capital machinery importers would soon be exempted from paying Advance Income Tax (AIT) on their imports on a larger scale.

The National Board of Revenue (NBR) recently took a decision to this end on requests from the local manufacturing industries.

The income tax wing of the NBR will shortly issue a Statutory Regulatory Order (SRO) to this effect.

Now all importers of capital machinery in the manufacturing sector, except those doing it for commercial purpose, will enjoy the exemption of AIT on issuance of the SRO.

Earlier only the manufacturing sector importers of capital machinery, who were paying no or concessionary rates of customs duty (CD), were enjoying the benefit.

In the budget for the current fiscal year of 2019-20, the income tax wing exempted only the capital machinery importers in the manufacturing sector from payment of the AIT at a rate of 5.0 per cent as they were enjoying concessionary rates or exemption from payment of CD.

Officials said the NBR already requested its income tax wing to incorporate the provision on AIT waiver in the automated system for customs data (ASYCUDA) for making the benefit available.

Bangladesh entered the ASYCUDA world operations to put in place an innovative, effective and efficient customs clearance process.

There are different customs duty rates on import of capital machinery ranging from 1.0 per cent to 25 per cent.

Some of the manufacturing industries depending on their nature of products and areas enjoy reduced or concessionary rates at 1.0 per cent. Others have to pay customs duties at higher rates such as 5.0 per cent, 10 per cent, 15 per cent and 25 per cent.

Officials say AIT is adjustable with the actual payable taxes at the time of submission of tax returns.

Many of the industry insiders claimed that AIT and the newly-introduced Advance Tax (AT) raised the business cost significantly.

However, a senior tax official has said around 58 per cent of the income tax comes in the form of AIT at the import stage.

"If the tax and VAT wings cannot collect the advance tax from the importers, the government will be deprived of its due amount of revenue," he said, pointing out the trend of tax evasion in Bangladesh.

He said most of the top individual taxpayers were from the segment of commercial importers who paid tax in advance at the import stage.

The official said unless the tax culture develops and the taxpayers participate voluntarily the NBR would not be able to come out of the system of collecting the advance tax.

Capital machinery for power and energy sector, agriculture, local motorcycles, refrigerators, air conditioners, etc is enjoying concessionary rates.

As per an SRO, capital machinery under the 662 HS code enjoys concessionary rates of customs duty on import.

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