Supermarkets demand VAT let-off at least during pandemic

Mohammad Yasin, a security guard at a Moghbazar residential building in the capital, went to an outlet of Shwapno – one of the largest retail chain shops – for the first time to buy vegetables and grocery items.

Nowadays he avoids open and dampened markets as risks of coronavirus contamination and its person-to-person spread are much higher there.

For daily shopping, thousands of city dwellers, like Yasin, now prefer supermarkets that offer free but mandatory hand sanitisation and ensure social distancing among buyers. At the same time, the prices of commodities there seem quite similar to those charged at traditional kitchen markets.

Yasin was surprised to see that the superstore was not cashing in on the present crisis even after a severe disruption in its supply chain.

But a few moments later, disappointment was his when he learned that prices of detergent, biscuits and some other packaged products would cost him an extra 5 percent in the form of Value Added Tax (VAT).

The government charges VAT over maximum retail prices of packaged products if they are bought from super shops.

The Bangladesh Supermarket Owners' Association has long been labelling the tax as discriminatory and requesting the government for a level playing field to enable them to compete with traditional retailers who need not pay the amount.

But over the years, VAT has only seen a repeated rise which has made customer acquisitions at the supermarkets that much harder.

Therefore, the organisation wants a VAT withdrawal in order to prevent customers like Yasin from going to open markets, at least until the coronavirus pandemic is over.

In a letter to the Ministry of Finance and the National Board of Revenue on March 23, the association said people now understand the importance of avoiding crowded and wet markets and so prefer to shop at superstores like Shwapno, Meenabazar, Agora, Unimart and Prince Bazar.

As customers are price-sensitive and uncomfortable with the additional tax, the superstore industry urged the government to remove VAT on them until the coming Eid-ul-Fitr, with the expectation that the outbreak will be arrested by then.

A super shop in Mogbazar seen busy during the national lockdown by the authority amid the concerns over coronavirus pandemic in Dhaka. Photo: Salahuddin Ahmed

"It is high time to stay at home. We are inspiring people not to go out, not even to come to our stores. We are delivering everything to their homes," said Sabbir Hasan Nasir, executive director of Shwapno.

In March, the Shwapno outlets in the city witnessed a sales growth of over 50 percent with a nearly 25 percent growth in footfall.

"The footfall growth and the customer database suggest that a large number of new people from middle- and lower-middle income groups are coming to supermarkets," said Sabbir.

Meenabazar, another popular retail chain shop, also observed around 50 percent sales growth in March.

Its CEO Shaheen Khan notes, "Way more people would opt for supermarkets for safer products, hygienic environment and stable pricing during the pandemic days if they did not have to pay the additional amount for packaged items."

The monthly collection from the said 5 percent VAT from supermarkets is not even Tk20 crore, which is negligible compared to the costs the nation bears in the fight against the novel coronavirus, said Bangladesh Supermarket Owners' Association's newly elected President Kazi Inam Ahmed.

"If the government sacrifices a part of the petty amount through responding to our crisis time plea, it will help arrest the coronavirus outbreak and pay back to the economy through stabilising the public health situation," he added.