Import tax cut on rice, oil, sugar, but how will it impact Ramadan market?

• The government has slashed import tax and VAT on rice, edible oil, sugar, and dates
• But traders are sceptical about the major impact of this move on the market
• Representatives of consumer rights bodies see such complaints from traders as excuses not to reduce prices in the local market
• The tax benefits have been extended to specific dates in 2024: until April 15 for edible oil, March 31 for sugar, May 15 for rice, and March 30 for dates.

The government has slashed import tax and value-added tax (VAT) on rice, edible oil, sugar, and dates in the view of the upcoming Ramadan, but traders are sceptical about any major impact of the move on the market.

They say the import duty and VAT have not been reduced to the expected rates. Moreover, the price of rice is increasing in the international market.

Businesses have also blamed the additional cost of opening letters of credit (LC), as well as taxation, on a higher valuation of the imported products than their invoice price.

However, representatives of consumer rights bodies see such complaints from traders as excuses not to reduce prices in the local market.

Ghulam Rahman, president of the Consumers Association of Bangladesh (CAB), told The Business Standard, "If the supply increases after the reduction in duty-tax at the import level, then consumers will benefit. But if it does not happen, then the government will lose revenue and traders will gain."

State Minister for Commerce Ahasanul Islam said on Thursday that the new prices of edible oil and sugar would be fixed next week.

"We will sit with importers and producers at the earliest and determine the prices at a logical level as per the impact of the duty cuts," he told reporters at the Secretariat after the publication of NBR's duty reduction order.

"The products will be sold at those prices on the occasion of Ramadan," he added.

According to a statutory regulatory order published by the NBR yesterday, the rice import tax (total tax incidence) has been reduced to 15% from 63%. Additionally, VAT on oil imports has been lowered from 15% to 10% and exempted at the production and retail stages.

The import tax on date palm has been reduced to 43%, down from about 59% previously, and the import duty on sugar has been reduced to $1,000 per tonne from $1,500.

The tax benefits have been extended to specific dates in 2024: until April 15 for edible oil, March 31 for sugar, May 15 for rice, and March 30 for dates.

Biswajit Saha, director of City Group, one of the largest consumer item importers and distributors in the country, told The Business Standard, "The reduced duty on sugar will decrease the price by Tk0.50 per kg, and the price of edible oil may only decrease by Tk5."

"Although the government fixed the dollar rate at Tk112, they have to purchase it at Tk124. So where is the opportunity to reduce the price?" he questioned.

Besides blaming the delay in issuing the order by the NBR, he said, "Many people could have opened LCs for imports if the order was issued as soon as the ministry or the prime minister said. But now, if the LC is opened, Ramadan will start when some products arrive. How much it will affect, I can't say."

NBR officials say LCs have already been opened for many goods, or the items have already reached the port. The bill of entry for the goods is being submitted now. Even if the bill of entry is submitted on Thursday, the benefit of the reduced rate will be available.

As a result, it is not the case that the benefit will be available for opening LCs from now on.

"Some importers speak this way to pocket the benefit," said an officer of the customs department at the NBR.

Serajul Islam, president of the Bangladesh Fresh Fruits Importers Association, told TBS, "Many people did not take delivery of dates from us after hearing about the duty reduction in the hope of a drop in taxes. But the duty has been reduced by only 10%. It is similar to deceiving us."

"But consumers will think that the duty has been reduced. The price will decrease. But in reality, there is no scope for price reduction."

"There are about 900 containers (of imported dates) at the port. Many did not submit the bill of entry for these consignments in the hope of reducing the duty. Now the duty cuts will not cover port demurrage," he deplored.

He also said the price of dates is increasing as customs are valuing the imported goods twice or more than the imported price.

Rice importer and miller Shahidur Rahman Patwary echoed Sirajul's sentiments.

He said, "The import price of coarse rice will be close to $500 per tonne. The dollar rate has increased to $120. As a result, if imported at this cost, the price per kg in the country's market will be close to Tk60, while it is selling below Tk50 at the local market.

"As a result, the possibility of imports is less, and the impact on the market is also less likely," he added.

However, CAB Vice President SM Nazer Hossain said, "Every time after tax reduction, businessmen come up with various excuses."

The government has to increase surveillance to ensure that consumers benefit from this tax reduction, he emphasised.