The National Board of Revenue has exempted automobile manufacturers from payment of value-added tax and supplementary duty on import of raw materials and spare parts for producing motor car and motor vehicles with engine capacity up to 1600cc in the country.
NBR has taken the initiative as the government looks to encourage development of an automobile industry in Bangladesh.
The growing automobile would enjoy the benefits on import of complete knocked down (CKD) motor car up to 1600cc and would get VAT exemption at local production stage on fulfillment of some conditions without any VAT and SD. However, the manufacturers and assemblers would have to pay 5 percent advance tax at import stage.
The benefit would prevail for two years upto June 2021 beginning from July 1, 2019 according to a notification from the tax administration released on June 13 as part of its overall tax and duty measures for fiscal 2019-20.
To avail the exemption benefit, assemblers will have to pay advance tax and must have facilities to make more than one component. According to the SRO, manufacturers would need to have some machinery for producing some basic raw materials including reinforcement pipe, reinforcement bracket, fuel tank cover, battery seal, engine hook and condenser fixing bracket.
The plant would also have to have some machinery such as four pole lifter, jib crane, brake force reader, air compressor, 3D wheel alignment machine, fuel dispenser, universal diagnostic tools and automatic pneumatic air gun.
In addition, the assemblers would also have paint shop approved by the actual manufacturer of the brand. The assemblers would also have to use locally made battery and tyres based on approval of the actual manufacturer.
They need to follow Euro 3 Emission Standard to ensure environment friendly production process.
There should be a technical assistance agreement between manufacturers and assemblers to develop skilled workforce and technology transfer.
The rate of value-addition should be at least 30 percent and at least 250 employees of total manpower should be Bangladeshi for availing the benefit. The amount of investment should be raised to Tk 500 crore within one year of obtaining the duty benefit.
At present, state-run Pragati Industries, Rangs Motors and PHP Family assemble sports utility vehicles and cars of certain engine capacity for the domestic market. PHP Family applied to NBR seeking the benefit as the company was assembling Malaysian Proton Saga car in the country. Though the state-run Pragati Industries Ltd also assembles SUVs and cars, it would not be able to avail the benefit as it usually assembles higher engine capacity motor vehicles, between 2,001cc and 3,000cc. Pragati though is building a modern assembling plant that would be complete in 2021 and hence sought the exemption benefit to be extended for five years instead of two.
Between 2013 and 2017, car registration increased, according to Bangladesh Road Transport Authority. On an average, 16,112 cars were registered in a year between 2011 and 2018.