Scrap ship importers have called for a waiver on tax or adjustment with letter of credit (LC) against Advanced Tax (AT) imposed in 2019-20 on import of scrap ships.
The importers are supposed to get the AT back or it is to be adjusted during opening an LC.
However, the government has not returned the amount to the importers and thousands of crores of taka have remained stuck in the state exchequer, affecting ship import directly.
Premium Trade brought a 24,039-tonne ship to Chattogram's Sitakund this year. According to customs law, the importer paid VAT for 20,635 tonnes, excluding 10 percent depreciation, and Tk4 crore as customs duty.
At a rate of Tk1,000 per tonne, the total VAT was around Tk2.16 crore along with around Tk4.35 crore as AT. However, Tk2.16 crore was not adjusted yet, creating problems for the importer.
Though the importers are supposed to get the money back within six months, Premium Trade's Tk25 crore, KSRM Group's Tk35 crore, Abul Khair Group's Tk12 crore, and BSRM Group's Tk180 crore are stuck in the national exchequer.
Talking on the issue, Premium Trade Managing Director Nurun Nabi said, "Ship import has dropped for imposing an extra VAT. We have to pay five percent Advanced Tax on LC value for each ship. As this VAT is not adjusted our expenditure increases, and we cannot cope with the international markets."
Bangladesh stood first importing scrap ships in 2019 when 236 scrap ships were brought to Sitakund coast.
"Ship import has halved this year. Last year, 30 lakh tonnes of scrap ships were imported whereas this year it is only 15 lakh tonnes. We have communicated with the National Board of Revenue for a waiver against AT. This waiver can boost up the industry," said Mohammad Zahirul Islam, executive member of Bangladesh Ship Breakers and Recyclers Association (BSRB) and managing director of PHP Ship Breakers and Recyclers Limited.
Importers concerned said the growing trend of scrap ship industry dropped after the budget was passed in 2019-20. In the last six months, before the budget was declared, 150 scrap ships were imported but only 79 ships were imported, after imposing a five percent VAT in the budget.
Until May this year, 69 scrap ships were brought to Sitakund coast whereas, during the same time in 2019, 150 ships were brought for scraping.
Besides, in 2019, 236 scrap ships worth 23.61 lakh tonnes were imported. In 2018, 215 ships worth 25.73 lakh tonnes were imported.
So, though 14 more ships were imported the weight fell by 1.80 lakh tonnes.
In 2017, 214 ships (21.90 lakh tonnes), in 2016, 250 ships (33.10 lakh tonnes), and in 2015, 221 ships (28.84 lakh tonnes) were imported.
As per the VAT Law 1991, importers paid 15 percent or Tk300 VAT and supplementary duties per tonne of tariff value of a scrap ship until 2018-19. After imposing an extra five percent tax in 2019-20, importers have to pay up to Tk1,800 to Tk2,200 as VAT, which importers claimed as "illogical".
BSRB secretary Md Shidique said, "Besides Advanced Tax and VAT, importers have to pay VAT for other items such as TV, refrigerator, burned mobile, and lube oil. So, they are paying VAT twice."
BSRB leaders communicated with high-level officers in the government regarding the issues, he added.