Essential commodities, agricultural products and life-saving drugs are going to be exempted from value-added tax under the new VAT law that takes effect in July.

A list of VAT-free products would be made public and hung in front of shops so that unscrupulous traders can't charge higher prices for commodities on the excuse of imposition of a uniform 15-percent VAT.

A number of top revenue officials shared this at a roundtable titled “The New VAT Law: Implication on the Economy and Consumers” organised by The Daily Star yesterday.

There are concerns about price spiral of many goods and services due to introduction of the new VAT system.

At the roundtable at The Daily Star Centre, most of the participants voiced worries, saying the uniform VAT would push up living costs.

Revenue officials, however, said prices of most of the commodities would not increase, as businesses would get rebate which many of them can't claim now because of reduced VAT rates at various stages of the supply chain.

“We have identified essential commodities for waiver so that living costs don't rise,” said Jahangir Hossain, member of VAT Policy of the National Board of Revenue.

The Daily Star Editor and Publisher Mahfuz Anam moderated the discussion.

It was attended by Consumers Association of Bangladesh President Ghulam Rahman, and representatives of Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), Foreign Investors' Chamber of Commerce & Industry (FICCI), The Institute of Chartered Accountants of Bangladesh (ICAB), superstores and local fashion brands.

Jahangir said the prices of goods except for some items such as rod shouldn't rise because of the new VAT system.

“We are careful so that buyers are not affected,” he said, referring to VAT exemption on life-saving drugs, agricultural products, poultry and livestock.

The list of the items would be made public during the budget presentation by Finance Minister AMA Muhith on June 1, he mentioned.

Revenue officials said medical services and healthcare; newspaper printing, publication and distribution; and education are also exempted from VAT under the new law.

CAB President Ghulam Rahman said businesses would get rebate but the consumers' burden would get heavier.

“We are anxious… We don't want additional increase in VAT rate, which will push up our living costs,” he noted.

Referring to the hike in prices of supply water and the government move to raise electricity prices, he asked, “Is it a right time to increase the burden on consumers?

“We want to know that there will be no additional VAT on the essentials. It will give relief to low and middle income consumers.”

Zakir Hossain, deputy project director of VAT Online Project, said dishonest traders may increase the prices of goods for “lack of morals”, not because of introduction of the new VAT system.

NBR official Jahangir said consumer rights protection authorities should be alert so that unscrupulous traders cannot hike prices on the pretext of the uniform VAT.

He said the government framed the law to expand revenue base and tax net. Currently, consumers pay VAT but the actual amount of the paid VAT doesn't go to the state coffers.

“We want to make all aware that they should take receipts of their purchases,” the official added.

Sabbir Hasan Nasir, executive director of ACI Logistics that runs retail superstore chain Shwapno, alleged that a section of importers and distributors doesn't want to           issue sales receipts, and this would make it difficult for them to claim rebate at various stages of the value chain.

He said there are distributors that are more interested in selling goods to small stores rather than big ones because small stores don't ask for sales receipts.

Sabbir also suggested implementing the new VAT law in phases.

Azharul Hoque Azad, president of Fashion Entrepreneurs Association of Bangladesh, said it would be difficult for local fashion houses to get receipts from weavers against purchases of fabrics.

“If we are to pay VAT, the burden will be on the shoulders of consumers,” he added.

Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue, “There will be inflationary impact though theoretically it appears there won't be any impact.”

He also suggested keeping the VAT rate at 10 percent instead of 15 percent.

Mohammed Humayun Kabir, co-chairman of the FBCCI standing committee on budget and taxation, said some provisions of the law are positive for businesses.

He, however, said there has been a lack of confidence among businesses as their issues and concerns were not addressed in the law.

Humayun also said goods prices could rise temporarily, and there may be a “shockwave” even in revenue collection during the transition period.

Various local industries would face uneven competition for removal of supplementary duty on imported items, he added.

However, NBR member Jahangir said the government had taken measures to protect domestic industries.

Md Shahadat Hossain, member council and ex-vice president of ICAB, said all businesses would have to properly maintain books of account, which would be very difficult for smaller firms.

Md Zakir Hossain, general secretary of Bangladesh Supermarket Owners' Association (BSOA), said prices of goods would rise if businesses face difficulties in getting rebate.

Revenue officials, however, said the new law has been framed in a way that all businesses would come under the net gradually. Costs of doing business would rise unless firms don't claim input tax credit.

Anne Maria Hermans, co-founder and managing director of online real estate market portal Lamudi Bangladesh, said prices of apartments would rise for imposition of 15 percent VAT, and it would affect the demand.

Abdul Khalek, convener of FICCI's sub-committee on trade, tariff, taxation & company affairs, said the existing law is very discouraging for both local and foreign investors.

He said electricity prices should not go up as the distributing companies would be able to claim rebate under the new law.

Md Rezaul Hasan, project director of VAT Online Project, said the         NBR aims to ensure that all transactions are recorded through automation.

Mahfuz Anam, editor and publisher of The Daily Star, suggested massive awareness campaign so that people know about the items that are exempted from VAT.

Consumers would be affected unless proactive measures are taken, he said.

Luthful Bari, president of Bangladesh Bicycle & Parts Manufacturers Association, said the NBR should arrange more training programmes for businesses.