Source tax on fruit imports may double; hotels, clinics to come under new tax net

• Source tax on imported fruits, flowers likely to be doubled from current 5%
• Currently, there is already 113% duty tax on fruit imports
• 8 businesses and service providers may be brought under tax net
• They are hotels, restaurants, motels, hospitals, clinics, diagnostic centres, community centres, and convention halls

The existing source tax on imported fruits and flowers may be doubled in the upcoming budget, raising it from the current 5% to 10%, sources in the finance ministry say.

Additionally, eight types of businesses and service providers may be brought under the tax net, obligating them to submit returns while getting or renewing their licences. These businesses and service providers include hotels, restaurants, motels, hospitals, clinics, diagnostic centres, community centres, and convention halls.

While flowers are not imported in large quantities into Bangladesh, fruits are imported significantly.

TBS Illustration

The current duty tax on fruit imports is already 113%.

"Fruit is not a luxury item. It is needed by all classes of people. As a result, it is unreasonable to have import tax at such a high rate," Muhammad Abdul Mazid, former chairman of the National Board of Revenue (NBR), told TBS.

"Because of this, it will not be possible for low-income people to buy imported fruits. Since fruits like apples, oranges, dates, grapes are not produced in Bangladesh, it is not right to increase the tax on the import of these fruits," he added.

Fruit importers say the import has already decreased due to high customs duty and rising dollar prices. If the tax is increased again, it could be reduced further, they said.

Importers say after the dollar crisis began, the cost of importing fruits increased further after the NBR raised the regulatory duty on fruit imports by 20% two years ago, leading to a decline in imports. However, the domestic fruit market has grown during this period.

Tax net expansion

In the upcoming budget for FY25, proof of submission of return (PSR) may be mandated for eight additional business and service categories. Licensing organisations must verify possession of PSR before issuing or renewing licences for these entities.

Furthermore, PSR submission may be extended to customers utilising services at community centres, convention halls, or similar entities. This implies community centre authorities would need to verify PSR for those renting halls for weddings, birthdays, or any social event.

According to NBR sources, some of the mentioned businesses and services in the country are under the tax net, but a large portion do not comply. If the new proposal is passed by parliament, they will be required to come under the tax net.

The country currently has over one crore tax identification number holders, of which less than 40 lakh file tax returns.

Sources related to the budget said the initiative is mainly being taken to bring a large number of TIN holders under the tax regime and also include those who are still without a TIN.