The existing customs tariff structure is not efficient and business-friendly due to faulty categorisation system in duty rates on import of basic raw materials, intermediate products and final consumer goods, a study has revealed.
It has found some of the basic raw materials fall under high tariff rates while some final products fall in low rates under the existing tariff structure.
The findings of the study on 'rationalisation of customs tariff structure' conducted by the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) have been unveiled recently with detailed proposals for consideration in the budget for the fiscal year (FY) 2016-17.
"In sum, this study provides a blend of proposals to strike a balance between the conflicting interests of revenue earnings maximisation, growth of domestic industry and promotion of investment through simplification of tariff regime," the study report said.
In a calculation, it showed the government can earn additional Tk 13.76 billion net revenue through rationalising tariff as per the proposal of the FBCCI.
The apex chamber body proposed dividing the products in five categories including essential commodities and products, capital machinery and spares, raw materials (both basic and intermediate) that don't have domestic production, raw materials (both basic and intermediate) that have domestic production and finished products and final consumer goods.
Currently, products are categorised into four different groups for imposition of duty-taxes that include basic raw materials, capital machinery and spares, intermediate raw materials and finished products and final consumer goods.
"The NBR uses the tariff escalation principle also called 'cascaded tariff' system in setting tariffs. Accordingly, Bangladesh tariff should have been structured as 5.0 per cent tariff for basic raw materials, 10 per cent tariff for intermediate products and 25 per cent tariff for final consumer goods. But the reality is different," the FBCCI study said.
The average import tariff or customs duty on basic raw materials is found 8.71 per cent instead of general 5.0 per cent, it added.
The average import tariff on intermediate products is 11.22 per cent instead of general 10 per cent as all of 2,274 products belonging to that category don't attract 10 per cent tariff, it said.
These products attract zero per cent, 5.0 per cent and 25 per cent tariff, the study said. Similarly, the current average rate of final consumer goods is 19.64 per cent which is supposed to be 25 per cent.
The study found some of the final consumer products attract zero per cent, 5.0 per cent and 10 per cent tariff.
About 1,467 products are subject to Supplementary Duty (SD) currently. Although SD is an internal tax and according to the GATT principle III, National Treatment (NT) is to be ensured on internal taxation, this is not currently in practice. In many cases, SD has emerged as an effective tool to provide protection to domestic industries.
In the study, the FBCCI proposed continuation of zero per cent import tariff on import of essential commodities and products, continuation of uniform tariff rate of 1.0 per cent on imports of capital machinery or capital goods including spares without any condition attached.
It also proposed imposing 3.0 per cent tariff rate on import of 674 tariff lines of raw materials, both basic raw materials and intermediate goods that don't have domestic production. Of these 674 products, 251 currently attract 5.0 per cent and 392 attract 10 per cent and 31 attract 25 per cent customs duty.
The NBR should fix the tariff rate of 25 per cent on import of 136 finished products instead of current 10 per cent customs duty, it said.
The apex trade body also proposed fixing the tariff rate of 3.0 per cent on import of 86 tariff lines and tariff rate of 10 per cent on import of 106 tariff lines of final consumers' goods that currently attract 5.0 per cent customs duty.
The FBCCI proposed the use of regulatory duty (RD) both to compensate revenue loss and to provide a respite to domestic industry from the loss of protection in the wake of contemplated withdrawal of SD under the new VAT and SD act.
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Source: The Financial Express