Levying a 50 percent tax on import over-invoicing or export under-invoicing is a good initiative
It was a good move by the revenue board to widen the scope for whitening black money for investment in securities, undisclosed property, land and building.
Schemes for investment in land and apartment may boost the real estate sector.
However, undisclosed cash whitening should be discouraged as one will now get the chance to disclose cash while paying taxes. It could encourage corruption in the coming years.
But investment in the shares of manufacturing companies could be brought under this amendment.
Levying a 50 percent tax on import over-invoicing or export under-invoicing is a good initiative provided that we can implement it and give exemplary punishment to the wrongdoers.
The tax collected at source from apparel export has been increased to 0.5 percent from 0.25 percent.
This change will adversely impact the apparel sector and worsen the negative impacts on the profitability of the sector – already hit hard by the Covid-19 pandemic.
Corporate and personal tax cuts are very welcoming move amid this pandemic, however.
Now our rates will be more comparable with the ones of similar economies.
However, the individuals' end-benefit will be affected if the existing tax-free limit on gratuity income is made conditional.
And the employees of private companies did not get the assurance of any retirement benefit from the government in the proposed budget.
Mandatory tax filing provision will undoubtedly increase tax compliance but the administrative cost might rise if the system is not digitalised.
However, export-oriented companies will no longer be required to submit the input-output co-efficient.
They will also be allowed to claim the value added tax (VAT) paid on input as decreasing adjustment. This will undoubtedly cut their cost.
Advance Tax on import of industrial raw material for production purpose, which will be reduced to 4 percent, will increase the working capital of the businesses.
Time limit to claim both input VAT rebate and decreasing adjustment of advance income tax (AIT) has been extended, from the next two tax periods to the four tax periods.
This will give adequate flexibility to the businesses.
Machinery and spare parts have been included in the definition of input.
Also, an entity will be eligible to claim 80 percent of VAT rebate on VAT paid on transportation cost.
Input VAT rebate for utility bills is enough. It will reduce the cost of production, making an entity more competitive.
However, as per the proposed amendment, VAT rebate needs to be claimed on consumption basis which might increase the cost of business, as an entity cannot use all the materials purchased or imported within four months.
Since an entity is considered an ongoing concern, keeping the current provision unchanged will be a more business-friendly move.
A rise in disputed VAT deposit at the time of filing an appeal to the Commissioner (Appeal) and VAT Appellate Tribunal from 10 percent to 20 percent will pose a big burden for the businesses.
This means an entity will be required to pay 50 percent of the disputed amount to seek justice from the Supreme Court. This will act as a deterrent to justice.
Amendment in section 196 of the Customs Act, 1969 needs to be analysed further.
And the revenue authority may now appoint its member as a member of the VAT Tribunal instead of seeking the service of a judge.
Snehasish Barua FCA is a Partner at Snehasish Mahmud & Co