Relief for consumers as govt may halve source tax on 28 essentials
Reducing the total tax incidence on imported packaged powdered milk from 89.32% to 58.60% also planned
![TBS Illustration](https://www.tbsnews.net/sites/default/files/styles/infograph/public/images/2024/05/29/p_1-planned-tax-duty-cuts-on-essential-commodities.jpg)
In a belated yet welcome move, the government is set to halve the source tax to 1% on the supply of 28 essential commodities and food grains, a measure that aims to provide some relief to consumers grappling with persistently high inflation, according to finance ministry officials.
They mentioned that supply of rice, wheat, potato, onion, garlic, peas, chickpeas, lentils, ginger, turmeric, dry chilli, pulses, maize, flour, whole flour, salt, edible oil, sugar, black pepper, cardamom, cinnamon, cloves, dates, bay leaves, jute, cotton, yarn and all types of fruits will be subject to deduct a 1% tax at source instead of the current 2%.
![TBS Illustration](https://www.tbsnews.net/sites/default/files/styles/infograph/public/images/2024/05/29/p-1-hightlights.jpg)
On the other hand, the government is also planning to reduce the total tax incidence to 58.60% from 89.32% on the import of packaged powdered milk weighing up to 2.5kg. Currently, the total tax incidence for bulk quantity importers of powdered milk is 37%.
Besides, the government is also planning to calculate the advance income tax for bulk quantity importers of powdered milk at the import stage.
Experts and business leaders welcomed the plans of reducing sources tax on essential items, stating that it will benefit consumers. However, they urged the government to ensure its proper reflection in the market.
Finance ministry officials said the National Board of Revenue (NBR) has taken these steps following Prime Minister Sheikh Hasina's directive to ease pressure on consumers in the upcoming budget, which will be proposed by Finance Minister Abul Hassan Mahmood Ali in the national parliament on 6 June.
Earlier, on 14 May, the prime minister instructed not to increase taxes on food, agro-related items, and fertilisers in the upcoming budget, given the country's high food inflation.
According to NBR sources, fiscal policy officials from the NBR met with the prime minister to inform her about the proposed policy changes.
Sources present at the meeting with the prime minister told TBS, "The prime minister directed the NBR not to increase any duty or tax on food and food-related items as food inflation is already high."
According to the latest data from the Bangladesh Bureau of Statistics (BBS), in April, Bangladesh's food inflation was over 10%.
'A benefit for consumers'
Dr Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), welcomed the tax cut on the supply of essential commodities and food grains, noting that the CPD has been advocating for such a reduction amid high inflation.
"This is a benefit for consumers, not importers, and the government must ensure it," she told TBS yesterday.
She also said tax cut measures are often not fully reflected in the market. "So market management is very important here," Dr Fahmida said.
Mahbubul Alam, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said the reduction of taxes on the supply of essential commodities is a very positive move.
"We have been requesting for a long time to reduce the rate. The initiative will be helpful in curbing food inflation," he added.
The duty reduction on the import of packaged powdered milk will encourage the import of finished goods. If the import or buying cost comes down, it should be reflected in retail prices, the FBCCI president said.
He further said, "When your cost is reduced, consumers should benefit from it."
Mahbubul Alam also said that if the government does not increase the advance income tax rate for powdered milk importers and treats it as a final settlement, it will benefit businesses.
However, Abul Kashem Khan, former president of the Dhaka Chamber of Commerce and Industry, said, "We have been opposing the idea of advance income tax for a long time, but any move to reduce taxes is always welcome."
"If the government reduces any tax by 1%, it would be very helpful for local businesses and traders," he said.
The government should introduce a refund policy for taxes deducted in excess of the actual amount, he said, adding, "Otherwise, the tax burden will exceed the profit."
Abul Kashem said, "If the government is unable to refund the excess amount, it should be adjusted in the following fiscal year."
Dairy industry leaders have been demanding the introduction of a cap on the import of powdered milk, similar to other commodities such as rice and onions, to protect local entrepreneurs as the local dairy industry has the capacity to almost meet the country's demand.
Bangladesh Dairy Farmers' Association President Mohammad Imran Hossain said the country requires 1.55 crore tonnes of milk annually, of which local farmers have the capacity to produce 1.45 crore tonnes of milk.
"To produce 10 lakh tonnes of milk will require 1.5 lakh tonnes of powdered milk," he said, adding, "the government should issue a quota to import the required powdered milk to protect the local industry."
He further said dairy farmers are facing challenges in importing vitamins, minerals, machinery, and technologies for the industry due to high duty.