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The state-run Trading Corporation of Bangladesh (TCB) has requested an exemption from the procurement provider VAT for all suppliers of edible oil and sugar in local tenders, sources say.
It recently made the request to the commerce ministry, urging the latter to take steps in this regard.
The move is aimed at levelling the playing field for all bidders, increasing competition, and ultimately reducing the government's subsidy burden, it said in the proposal.
TCB, a non-profit body, operates with government subsidies.
It sells essential items, including edible oil, lentil, and sugar, at subsidised prices among 10 million low-income, smart card-holder families across the country every month.
Besides, it procures chickpeas and dates for the holy month of Ramadan, while selling potatoes and onions during emergencies.
The procurement process includes both open tendering method (OTM) and direct purchase method (DPM), with advance income tax (AIT) and applicable VAT factored into the bids.
TCB claims edible oil and sugar manufacturers are typically exempted from the procurement provider VAT at present, but general traders are obligated to pay this, which currently stands at 10 per cent.
This is a significant disparity, which prevents tenders from being truly competitive, a TCB internal note highlights.
The structural inequality discourages traders from participating, limiting the number of bidders and potentially leading to higher procurement prices for TCB.
The TCB request references a precedent where the corporation was previously granted VAT exemptions for a smaller volume of essential goods in order to help stabilise prices and allow consumers to buy products at cheaper rates.
A TCB official says the corporation has sought an exemption for 240 million litres of edible oil and 0.12 million tonnes of sugar, citing the need to ensure equal opportunity and participation from a wider pool of vendors.
According to the proposal, if such a large amount of products are exempted from the procurement provider VAT for all suppliers, the TCB can achieve more competitive bids, which will directly lead to a reduction in the amount of government subsidy required to run the essential goods programme.
TCB notes that other items like lentils, chickpeas, dates, and onions procured in 25/50kg bags are already VAT-exempt.
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