Investment and employment are gaining special importance in the budget to address the ongoing global crisis and continue the process of recovering from the Corona epidemic. Therefore, there are various initiatives including reduction of corporate tax of the company, tax exemption in one person company, tax reduction of startup company. Apart from giving VAT exemption to emerging industries, the duration of ongoing benefits is also being extended. This information was obtained by reviewing the budget raised by the Finance Minister in the National Assembly on Thursday.
In his budget speech, the finance minister said the current corporate tax on readymade garments is 12 per cent for general garments and 10 per cent for green factories. While the accessories industry as a backward industry makes a significant contribution to foreign exchange savings, they have to pay income tax at a regular rate (30 percent). There is inequality in jute, frozen fish, plastics, leather.
To encourage diversification of export products in the forthcoming budget, it has been proposed to impose corporate tax on all types of export oriented industries like readymade garments industry. This will reduce the trade deficit. As a result, the current account balance of foreign transactions will be reduced.
Besides, the present government is giving utmost importance to the ICT sector. In this context, special incentives have been taken in the budget for startup initiatives to build a digital Bangladesh. In the budget for the next financial year 2022-23, startup entrepreneurs are being exempted from the obligation of filing all types of reporting except filing income tax returns.
Besides, it has been proposed to adjust the losses of the startup company for 9 years. There is also a proposal to lift spending restrictions and reduce the turnover tax for startup entrepreneurs from 60 percent to 10 percent.
In addition, the budget has proposed to provide VAT exemption facility to the automotive manufacturing industry. Current facilities are provided in refrigerator, AC, TV, home appliance, mobile connection, elevator connection industry. It has also been said that marginalized and disadvantaged people need to be integrated into the mainstream of society.
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In this case, the issue of disabled and third gender people is being given special importance. Therefore, by amending the existing provisions, if an organization employs these two types of employees in the case of both the disabled and the third sex, then the company will get the benefit. For example, it has been proposed to add the necessary provisions to allow the employer to approve 75 per cent of the salary paid to those employees or 5 per cent of the tax payable whichever is less.
The budget proposal calls for the abolition of the existing advance tax on gold imports to encourage legal import of gold and stop smuggling in the country. This will lead to massive development of jewelry industry and increase government revenue. The Finance Minister further said that it is important to maintain the current incentives of the textile sector to retain the money of the garment sector.
The current SRO of 15 per cent of the existing tax rate in the textile industry is due to expire on June 30. I am proposing to extend this period till June 30, 2025. In order to reduce the production cost of the industry, I am proposing to reduce the rate of withholding tax on supply of raw materials to the manufacturer from 6% to 4%.
As there is no specific provision in the existing law for approval of expenditure in the research and development sector, it has been proposed to define that sector and make it eligible for expenditure approval. Besides, it has been proposed to increase the allowable expenditure in the perquisite sector from Tk 5 lakh 50 thousand to Tk 10 lakh.
Besides, the finance minister said the country has already provided direct and indirect employment to 2 million people in the IT sector. At present 6 lakh freelancers are involved in outsourcing profession. The government has taken a plan to increase the employment based on information and communication technology to 3 million by 2025. At the same time, 100 economic zones are being set up, which will provide employment to 10 million people.
Extensive employment generation initiatives are also underway in the fisheries and animal husbandry sectors. The construction work of 100 technical training centers at upazila level will start in the next 2022-23 financial year. Besides, overseas employment of 8 lakh 10 thousand Bangladeshi workers will be ensured in the next financial year. Besides, 5 lakh 20 thousand people will be given skill development training in different trades.
There are various initiatives for the development of more domestic industries in the coming financial year. One of these is the proposal to reduce the fine from Tk 10,000 to Tk 5,000 for failure to submit VAT or turnover tax returns by the due date.
In addition, the amount of fines imposed in case of VAT evasion, failure or irregularity is being halved from the amount of revenue involved. The current VAT rate on LPG cylinders at local production level is 5 percent. It will be extended for another 1 year. It is proposed to extend the existing VAT exemption facility for production of compressors of refrigerators and freezers till June 30, 2025.
The existing VAT exemption for locally produced polypropylene staple fiber has been maintained and advance tax exemption has been given for the import of materials. In the case of API production, VAT and supplementary duty exemption facility including total value added tax at production stage and advance tax on import of raw materials used in production and purchase locally will continue till 31 December 2025.
VAT and supplementary duty facility for production of 2500 cc motor cars and motor vehicles for development of heavy industries in the country will remain till June 2030. The value-added tax, advance tax and supplementary duty exemption facility for local production of three wheelers will be available till June 2025.