Govt to raise specific duty on clinker import by Tk200 a tonne

Infographic: TBS

The government is planning to increase the specific duty on clinker by Tk200 per tonne during the import stage for both cement manufacturers and commercial importers, as revealed by officials from the finance ministry.

Currently, cement manufacturers pay Tk500 as a specific duty per tonne of clinker during the import stage, but this will rise to Tk700 in the next fiscal year. Similarly, commercial importers currently pay Tk750, which will rise to Tk950.

In addition to this, the government also intends to reduce some VAT and advance income tax (AIT) on the imports of terephthalic acid, ethylene glycol, hot rolled stainless steel sheets in coil, and manganese, as mentioned by finance ministry officials.

The upcoming budget aims to generate more revenue from the cement sector by imposing an additional specific duty on cement clinkers, as highlighted by the finance ministry officials.

Although the country is currently self-sufficient in cement production, the existing rates have remained unchanged since fiscal 2012-13, according to the officials.

Business leaders have, however, expressed concerns that an increase in duty on cement clinker will burden the cement industry and potentially impact end consumers.

They have also noted that the cement industry is currently operating at half of its installed capacity, with manufacturers engaging in a price-cutting war to maintain their market share.

The reduction in VAT and advance income tax (AIT) rates on certain raw materials will provide some relief to steel manufacturers, said finance ministry officials. However, cement manufacturers have said the reduction is negligible and will not have any significant impact on the cost of production. 

Mohammed Amirul Haque, managing director and CEO of Premier Cement Mills Limited, shared his thoughts on the matter, stating, "If the government imposes any duty that affects the overall production cost, it will ultimately be passed on to the end consumers."

He added that such a move could result in a Tk10 increase in the retail price per 50kg bag of cement.

Md Khorshed Alam, executive director of Meghna Group of Industries, emphasised the importance of utilising the industry's full capacity, stating that government policies that promote maximum capacity utilisation would contribute to higher revenue generation.

According to industry insiders, Bangladesh's clinker imports have significantly increased from approximately 14 million tonnes in 2012 to around 40 million tonnes annually.

Meanwhile, the installed capacity of the industry is more than double the current market demand.

Speaking on the condition of anonymity, an official from the Bangladesh Cement Manufacturers Association (BCMA) revealed that cement manufacturers are engaged in a price-cutting competition at the retail level in order to increase or maintain their market share.

In some instances, these manufacturers are selling their products at prices below their production costs, further exacerbating the situation, the official added.

The BCMA officials have also taken action by submitting a letter to the National Board of Revenue (NBR), requesting a reduction in the specific duty on clinker per tonne to Tk200.

Steel manufacturers may get relief

Finance ministry officials mentioned that considering the industry situation the new budget is likely to reduce AIT to 2% from the current rate of 3% on manganese imports.

At the same time, VAT on the import of terephthalic acid, ethylene glycol, and hot rolled stainless steel sheet in coil is likely to be slashed to 5% from 15%.

They mentioned that such raw materials are mainly used in the steel industry.  

While talking to the TBS, Shahriar Jahan Rahat, deputy managing director of the KSRM Group, said that the reduction of import-stage VAT on HR coil and related chemicals has no impact on the price of corrugated galvanised iron (tin) as output VAT remains the same. Some working capital may increase in the HR coil industry as import-stage advance VAT has been proposed for reduction.

Only a 3.1% AIT reduction on manganese has no impact on cost as final tax of 27.5% on steel bar remains the same. The manganese reduction is negligible because 0.18% manganese is used per tonne in steel bar production, he added.