The Payra Dredging Company Limited will get a Value Added Tax (VAT) waiver on all expenses in the capital dredging of Payra Deep Seaport Project.
This will be the first project under Public Private Partnership (PPP) to get such a facility throughout its entire tenure of 12 years.
The National Board of Revenue (NBR) will exempt the company from the VAT burden even though it will lose a hefty amount in revenue from the big project involving Tk8,643 crore.
The revenue board usually gives VAT waivers to consultancy and supervisory firms, suppliers of all goods, except for petroleum and legal advisory services, on the basis of agreements.
But from the very beginning of the company's agreement with the government, the Belgium-based company has been seeking VAT relief on all kinds of activities. The NBR has rejected its appeal several times. Finally, however, it is going to offer the exemption, following a directive from government high officials.
Generally, customs duty and VAT are waived on certain services, including capital machinery import, under government projects on condition of exports.
However, no area of VAT exemption has been fixed in the capital dredging project. Therefore, the Payra Dredging Company, formed under PPP, has been demanding a VAT waiver on all services from the beginning.
Seeking anonymity, an official at the NBR's VAT Department said 5-15% of VAT is usually applicable to various services relating to a project. There are also customs duties at different rates on imports.
But it is the NBR that will be deprived of at least Tk500 crore in revenue from this project.
According to sources, the NBR rejected the company's first demand for a VAT waiver in November 2019. It also turned down its second proposal, sent through the shipping ministry on February 10 this year.
However, in August, the dredging company secured an approval for VAT relief from the prime minister. Against this backdrop, the NBR sent a summary of the waiver to the finance ministry.
With the finance minister's approval, the NBR may issue a notification on the VAT waiver next week.
According to the Payra Port Authority, it will take 14 months for an engineering survey and another 14 months for capital dredging. Later, there will be primary maintenance dredging for six months and maintenance dredging for more than 9 years.
Mahfuz Alam, deputy director of the Payra Port Authority, told The Business Standard, "Although it is a PPP-based project, we have not been able to finalise yet how much the Bangladesh government will invest in the capital dredging. That is why the stakes in the project have not been fixed."
The amount of money that will come in the form of port charges will be enough for the maintenance of dredging that will continue for a long period, said Mahfuz Alam.
Port officials said such waivers are expected to make this new port fully ready and attractive to users which will enhance earnings of the port.
In 2019, the Chattogram Port Authority struck a deal with a Belgium-based company, Jan De Nul, for capital dredging of a 75km long and 100 to 125 metre wide main channel of the port. But the project work is yet to begin.
Once the capital dredging is done, 3,000 container vessels, having a length of 20 feet, and bulk vessels, each with a capacity of 40,000 tonnes, will be able to anchor directly at the Payra Port jetty.