Planning Minister M A Mannan has recommended waiver of 5.0 per cent value added tax (VAT) on commission of indenting agents to facilitate their repatriation of foreign currency to Bangladesh.
He recently sent a demy official (DO) letter to Finance Minister A H M Mustafa Kamal, requesting him to consider the issue.
In the letter, Mr Mannan said the indentors have been recognised as ‘service exporters’ by the Ministry of Commerce for earning foreign currency.
As per the existing law, no VAT is applicable on the country’s exporters to help them stay competitive in the international market.
Earlier, the commerce minister also sent a letter to the finance minister with the same request.
Their recommendations came following demand of the Bangladesh Indenting Agents Association (BIAA) after imposition of 5.0 per cent VAT on them in the budget for fiscal year (FY) 2019-20.
Requesting VAT exemption, the BIAA President Rafiqul Islam Masum, in a letter, noted the Office of Chief Controller of Imports and Exports (CCI&E) awarded the status of ‘service exporters’ to the indenting businesses on December 11, 2018.
The planning minister, in his letter, also said the indentors are the representatives of foreign exporters, and are assigned to marketing their products in Bangladesh.
They also procure quality raw materials from the international market for the country’s export-oriented industries.
The indenting agents get their commission in foreign currencies from overseas companies for working as their local agents, Mr Mannan further said.
The indentors sent their commission or royalty in formal banking channel through proceed realisation certificate (PRC).
“VAT should be withdrawn for the FY 2019-20 on commission of the indentors as service exporters,” he added.
Talking to the FE, the BIAA former president K M H Shahidul Haque said there is a stay order of the Appellate Division on a writ filed against imposition of VAT on the indenting businesses.
He said the indentors are entitled to enjoy VAT exemption on their commission as ‘service exporters’.
Last year, VAT at a rate of 15 per cent was imposed on indenting commission, which has been brought down to 5.0 per cent in FY 20, he added.
However, the indentors are not paying any VAT due to the stay order of the Appellate Division.
Considering the indentors’ contribution in foreign exchange earning, the government had withdrawn 15 percent VAT on their commission in FY 2014-15.
As a result, the indentors were highly encouraged to repatriate commission, and the volume of repatriation increased tremendously.
However, VAT on repatriated indenting commission was re-imposed in FY 2016-17.
Industry insiders said the re-imposition of VAT may create a negative impact on the indentors’ repatriation of foreign currency to the country. Some of them may prefer to keep their money abroad to avoid payment of VAT on commission.
The indentors work for overseas companies, exporters, investors and consultants as agents for marketing their goods and commodities in the country.
There are some 2,500 members registered under the BIAA. However, the number of indentors is higher, as many of the indenting agents are not members of the association