Advance tax likely to hike prices of food grains

The upcoming budget for 2020-21 fiscal year is going to keep a provision of a 2 percent advance tax for the wholesale trades of some food products at local level, said sources at the finance ministry. 

So, the prices of essential commodities, including rice and lentils, may witness a hike, believe experts.  

Sources also said wholesale traders of rice, wheat, potato, flour, salt, edible oil, sugar, dates, lentils, ginger, garlic, cinnamon, cardamom, cloves and all kinds of fruits will have to pay 2 percent in advance tax. 

A wholesale trader, who buys these products in the local market through a contract, will have to pay 2 percent in advance tax to the government. 

Jute, computer or computer parts, cotton and yarn are also on the list.

Under the existing income tax law of National Board of Revenue, these products were exempted from the advance tax in 2019-20 fiscal year. 

But the advance tax has been recommended in the upcoming budget.  

Millers sell their produced rice to stockists and wholesalers. If the products are purchased through a specific agreement like local letter of credit or any financial agreement, the advance tax is applicable. 

However, the advance tax would be refunded to the traders later. 

The traders said usually middlemen buy agricultural produces from farmers and sell those to wholesalers or local warehouses or corporate organisations who market consumer goods.

Edible oil, sugar, dates, pulses, ginger, garlic, dried chillies, cinnamon, cardamom, chillies, cloves and other fruits are imported. The importers who will sell these products to the wholesalers will also have to pay this advance tax.

When asked about the tax, Hajee Mohammad Majed, an importer from Moulvibazar, told The Business Standard that imposing advance tax on sales in the local market would increase the prices of all products. 

It will destabilise the local commodity market, he added.