In the proposed budget, the government reduced 1% tax for capital machinery imports by SMEs in all sectors.Income tax on different small businesses was reduced.
For example, business turnover tax for individual taxpayers was reduced to 0.25% from 0.5%. Advance tax was reduced from 4% to 3%for importing raw materials for industries. But removing advance tax during the pandemic would have been the most effective move.
Paying sales tax and VAT is a major harassment for SMEs. The government waived VAT for puffed rice manufacturers and fresh fruit sellers. These initiatives will safeguard SMEs of these sectors from the VAT hassle.
The government offered tax exemption for 10 years to home and kitchen appliances as well as light engineering products. SMEs will be eligible to enjoy these facilities. Also, a 20-year tax exemption was offered to automobile manufacturers.
But all the parts and components of a car cannot be manufactured by a single company. About 8,500 different small components are required to manufacture an automobile. There is a scope for establishing small and medium sub-contracting enterprises to produce car components.
The same benefit could be enjoyed by the subcontractors of automobile sector across the board. Small and medium, mainly medium enterprises of the said sectors, could enjoy the benefits where applicable.
Tax is applicable after income.At this moment, many small enterprises are fighting for survival. Tax waiver is not an attraction if there is no income source.
SMEs mostly need stimulus support, not bank loans only, at this moment. They have to be rehabilitated first.A stimulus package right now will be their ventilator.
Rizwan Rahman is the president of Dhaka Chamber of Commerce and Industry