Businesses and companies with annual turnover of up to Tk 2 crore will no longer have to pay turnover tax, offering relief to small businesses.
The National Board of Revenue (NBR) issued a notification on Tuesday, introducing the exemption and revising the turnover tax structure for businesses and companies, officials said.
Under the revised provision, businesses and companies with annual turnover exceeding Tk 2 crore but up to Tk 4 crore will pay turnover tax at 0.5 percent of their annual turnover.
Those with turnover above Tk 4 crore will continue to pay a minimum turnover tax at the rate of 1 percent.
The 1 percent turnover tax had previously been applicable to most businesses and companies, with some exceptions. The latest decision has therefore provided a partial relief, particularly for smaller businesses.
An NBR official said the exemption was introduced to ease the tax burden on small businesses and provide them with greater financial relief.
The move comes after the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), the country’s apex trade body, recently urged the Ministry of Finance to gradually phase out the 1 percent minimum turnover tax imposed on businesses and companies. The Dhaka Chamber of Commerce and Industry (DCCI) also made a similar demand.
Business leaders have long argued that the minimum turnover tax increases the effective tax burden on businesses with low profit margins. Since the tax is imposed irrespective of profit or loss, businesses operating at a loss may also have to pay the tax.
However, industrial establishments can already pay turnover tax at a reduced rate of 0.2 percent instead of 1 percent for the first three years after commencing commercial production.
Different rates apply to certain sectors.
Manufacturers of cigarettes, bidis and tobacco products are subject to turnover tax at 3 percent, while manufacturers of carbonated beverages and sweets pay 2.5 percent. Mobile phone operators are subject to a 1.5 percent turnover tax.
The latest change applies to the general category of businesses and companies that were previously subject to the 1 percent rate.