Suppliers against int’l tenders to lose exporter status, facilities

Local businesses that supply goods or services against international tenders are going to lose their exporter status and all facilities in the next fiscal year, according to sources at the finance ministry.

If goods and services do not go outside Bangladesh's geographical boundary, it will no longer be considered as exports, the new provision incorporated into the income tax law defines.

Besides, under an internal back-to-back letter of credit, suppliers of locally-manufactured raw materials and other inputs to export-oriented industries will be called exporters.

So, from the next fiscal year, all other suppliers will have to pay a 5% tax at source on goods and 4% on raw materials, said finance ministry officials.

The government is going to introduce a new definition of export in the next budget as in the absence of it, many local businesses have long been enjoying export benefits only by participating in international tenders despite supplying goods and services to manufacturers for local consumption, they noted.

However, Abul Kasem Khan, former president at Dhaka Chamber of Commerce and Industry, told The Business Standard that if any local businesses can secure work orders of goods and services by competing with international suppliers, they should be allowed for continued export benefits.

"Whatever policies that the government formulates should be for enhancing competitiveness of all local businesses," he added.

In the meantime, the government is going to exempt research and development expenses from taxation, finally taking a long-time demand of businesses into consideration.

Currently, there is no clear provision in the income tax law to consider this expenditure as allowable expenses. So, tax is levied on it deeming it as income.

According to the new budget, research and development means any systematic, investigative and experimental study that involves novelty or technical risk carried out in the field of science or technology with the object of acquiring new knowledge or using the results of the study for the production or improvement of materials, devices, products, produce, or processes.

To appoint skilled manpower for research and development and business expansion in different industries, the new budget is going to increase the limit of allowable perquisites to Tk10 lakh from the existing Tk5.5 lakh, meaning that no tax will be imposed on it.

Perquisite is a privileged gain or profit alongside regular salary. Perquisites can be simple as a company car, fuel reimbursement and other benefits. It also includes interest-free loans, medical facilities, credit cards, accommodation sponsored by the companies, etc.

Finance ministry officials said the existing Tk5.5 lakh prerequisite limit is a main obstacle to recruiting skilled manpower. So, the government has decided to raise the bar.

There is also good news for microcredit lenders in the next budget as they do not have to compulsorily receive all deposits through the banking system.