Cement industry demands relief from high-tax burden

The cement industry of the country wants relief from the high burden of duties and taxes levied on the industry to keep the price of this major construction material within the reach of customers.

The Finance Bill-2023 has proposed an increase in customs duty (CD) on imports of clinker by Tk200 to Tk700 per tonne. In contrast, the industry had been requesting the government to reduce the CD from Tk500 to Tk200.

A duty of Tk700 per tonne is around 12%-13%, which, in general, should not be more than 5% for such an important commodity, said Bangladesh Cement Manufacturers Association (BCMA) President Md Alamgir Kabir at a press conference at a city hotel on Monday.

Besides, there is a non-adjustable advanced income tax (AIT) twice – 2-5% during raw materials imports and 2% while selling finished goods. This AIT, along with the energy crisis, high transportation cost, dollar appreciation and struggle in opening letters of credit (LC), has made the cement industry weaker.

"The heavy burdens are not in favour of the cement industry but rather they may have detrimental effects, putting pressure on consumers and may lead to a slowdown in overall construction," said Kabir.

Even worse for the industry, the AIT is treated as the ultimate tax regardless of whether a company makes a profit or not, he added.

The AIT collected in two stages should be at most 0.5% that the industry can bear, the association believes.

With around Tk40,000 crore in total investments by three dozen companies, both local and multinational, the cement industry has not only made Bangladesh self-sufficient in the most important construction material segment but has also been exporting cement to the neighbouring North-Eastern Indian markets.

All raw materials of cement are imported.

Raw material prices go up and down in the international market, and the National Board of Revenue (NBR) collects advance taxes and duties based on fixed values which are higher than the actual import value, thus further increasing the duty burden on the industry.

Cement prices are going up as only the soaring dollar increased the manufacturing cost of a bag of cement by Tk50-Tk60. The proposed increase in customs duty on top of other higher costs nowadays would make the situation worse, said BCMA President.

The cement industry has been running with double installed capacity than demand and due to the competition among too many companies, the industry was in a disadvantageous position that weakened its ability to increase price, he added.

However, after several years of bleeding, companies started to see some profits earlier this year as industry players reached a consensus to raise cement prices to cope with the soaring costs.

On behalf of the industry, he demanded CD on clinker to be reduced to Tk200 per tonne, at best 0.5% AIT on imports and sales, and adjusting the AIT if firms cannot make profits.

A 15% cash incentive on cement export would help boost cement exports from Bangladesh. Amid the dollar shortage, LC opening has not only become tough but the increased need for cash during imports is also hurting companies, he added.