Bangladesh’s revenue board has expanded the value added tax (VAT) to all 60 services at Port of Chittagong, up from the 25 — a move that has drawn mixed reviews.
Currently, the port collects a VAT on 25 export-import services. Adding 35 more services to the VAT substantially raises the cost of doing business, businesses say.
Under the new system, services such as port dues, pilotage fee, night navigation fees, tug charges, shifting fees, un-berthing charges, mooring occupancy, jetty crane charges, quay gantry crane charges for container handling, charges for using a floating crane, fire service charges, hire of slipway, salvage and diving charges, and dredger hire will be subject to the VAT.
For example, the pilotage fee, currently $35.75 per 1,000 gross register tonnage (GRT), will have a $5.36 VAT.
The night navigation fee for vessels over 10,000 GRT, currently $43, will be assessed a $6.45 VAT; the tug charge for vessels over 5,000 GRT per hour is $632, a $94.80 VAT; the unberthing charge for a vessel over 2000 GRT, $88.50, a $13.27 VAT; and the jetty crane fee, $42 per period, a $6.30 VAT.
Chittagong Port official Habibur Rahman told JOC.com the port will seek a ministry of shipping opinion before it starts collecting the VAT on the 35 services.
Opinions on the expanded VAT are mixed. Port spokesperson Omar Faruk said everyone should pay the VAT for services they enjoy. “The VAT on the items would not raise cost a lot,” he said.
However, convener of Port Users Forum and Chittagong Chambers of Commerce and Industry president Mahbubul Alam said imposition of the VAT on all types of services at the port will create financial pressure on shippers.
“We pay a duty-tax on goods import. If a VAT is also charged on all types of port services, the cost of doing business will rise further,” Alam said.
Bangladesh Shipping Agents Association president Ahsanul Huq Chowdhury said the shipping rent will go up if VAT is imposed on the 35 other services. “It will cause an increase in the price of imported goods,” he said.
Bangladesh Freight Forwarders Association senior VP Amirul Islam Chowdhury said the ship rent may go up by 0.5 million Taka to 0.7 million Taka, due to imposition of the new VAT. “Imposing a 15 percent VAT on all types of services is irrational,” he said, adding that the revenue authority should have discussed the issue with stakeholders before taking such a decision.
Apparel comprises a majority of Bangladesh’s export-import activities. Bangladesh Garment Manufacturers and Exporters Association president Siddiqur Rahman said the apparel sector currently is facing several global challenges, which will only heighten with the expanded VAT on port services.
“The businessmen won’t agree to pay the new VAT, as a cost of doing business will go up significantly,” he said.