Proposed VAT and Tax on the imports of the raw materials used to produce the construction material in the budget 2019 -2020 may affect the cement price. The price may go up by Tk 42 per 50kg bag, said by Bangladesh Cement Manufacturers Association (BCMA).
Until the current fiscal year, cement manufactures pay 5 percent advance income tax (AIT) to import raw materials and the tax is adjustable. The AIT to be paid by the cement makers to import raw materials will be treated as the minimum tax from the next fiscal year of 2019-2020, according to the proposal of the National Board of Revenue (NBR).
Manufacturers said the bid to consider 5 percent AIT as the minimum tax will put increased burden on them. They already pay source tax against the supply of cement locally.
The sum of the two minimum taxes, 5 percent at import stage and 3 percent during local supply, will be a reason for losses for the cement industry. In addition, manufacturers will have to pay 5 percent advance tax (AT) while importing raw materials and other required ingredients. This will increase the operational cost and thus the prices of cement, according to the BCMA. They predicted that the prices of a 50kg cement bag may increase to Tk 460 from Tk 420 on average.
The impact of the price hike of cement will affect the housing sector and the government’s infrastructure projects. Such a hike in cement prices would lead to an increase in the cost of not only private infrastructure projects but also various government projects, including the Padma Bridge, Dhaka Metro Rail and the Rooppur Nuclear Power Plant, claimed by BCMA.
The association demanded making the 5 percent AIT on imports and the 3 percent source tax on local supply adjustable and withdrawal of 5 percent AT on imports.
BCMA said that the cement industry totally depends on imported raw materials, so, if it doesn’t get the exemption from 5.0 percent AT on imports, the companies will have to make 55 per cent gross profit and 15 per cent net profit in the post-production stage.
The market size of the cement sector is Tk 13,000 crore with 10% to 15% annually and the annual demand is 3.5 crore tonnes, according to BCMA. At present, 42 cement factories are active, with their combined installed manufacturing capacity standing at 5.5 crore tonnes. The investment in the sector is around Tk 30,000 crore.